The long road to recovery

American and world investors are heaving a sigh of relief at this morning's strong stock market recovery. After a sickening 42% drop from last year's market peak, the Dow Jones this morning surged back over 9,000.



It is not over yet. Just last Friday, the Dow swung an unprecedented one thousand points in a single day's trading. There will be more bad news as the credit crisis continues to ripple through the economy with mounting job losses and bankruptcies. But for now panic has abated and free fall in the markets has been halted.

This pause should give an opportunity not only to assess what went wrong, but to think clearly about how to move forward. "Rescuing" an economy in crisis is different from curing an economy of unsustainable practices. We spent too much on the wrong things and we will be paying for it for a long time. The solution is not to artificially reflate the bubble with borrowed taxpayer money, but to build a new foundation under our nation's economy.



No where does this make more sense than in the real estate market where this crisis originated. Not only did unscrupulous banks and brokers lend to people who couldn't afford the loans, banks and institutional investors bankrolled unsustainable sprawl development that has cratered, virtually freezing new housing development, especially here in California.



New urbanist author and Oceanside city planner Peter Katz has a thoughtful blog column on the subject here. He lays out a familiar critique of the folly of endless tracts of new homes at the far fringe of metropolitan areas, subsidized by massive public investment, especially in highway construction. He raises the provocative question of whether this pervasive "market failure" doesn't call for tougher national standards to protect the taxpayers who are paying for the $700 billion plus "bail out":

"Maybe it’s time, even as the billions of bailout dollars flow, for official Washington to get tough. It’s emerging as lender of last resort, asset manager for the wounded American taxpayer, assuming the responsibility for thousands of toxic mortgages on property that more diligent local planners might never have allowed to be built. So why could Washington not advocate — maybe even require as a price for the potential subsidies and loan insurance it may offer — compliance with planning rules aimed at promoting more economically robust, resource-efficient communities?"


Neither of the presidential candidates has addressed the underlying unsustainability of suburban sprawl. But any comprehensive effort to restore our economy must ask the question: are we going to invest massive taxpayer subsidies in propping up an unsustainable pattern of growth or are we going to direct those subsidies toward a more sustainable future.



Building houses no one can afford out where driving fuels our dependence on foreign oil, aggravates global warming and undermines the health of American children and families is not sustainable. Before we get back to lending money in the real estate markets, public policy must change to ensure that money is invested in a better -- and more prosperous -- future.

Meltdown?

Back on March 17 on this blog, I expressed concerns that the worldwide financial system "now appears in danger of collapse." On a day when the Dow Industrial Average closed at 11,972, I wrote: "The Dow dropping below 9,000 before President Bush leaves office is no longer an implausible prospect."

Today, of course, the Dow continued its march toward that grim milestone. Last week's historic $700 billion "bail-out" failed to halt the global slide in confidence in the financial markets. The impacts are radiating out and affecting the lives of every American.

No one knows what comes next, except that things are going to get worse before they get better. The meltdown on Wall Street has put in jeopardy $10 million of Ventura's conservatively-managed investment portfolio. Our AAA-rated bonds issued by Lehman Brothers and Washington Mutual are now of uncertain value in the wake of the bankruptcy of both firms. How much will eventually be recovered is simply unknowable at this time, although the Federal "bail-out" bill does have some provisions that may assist public agencies across the nation that have encountered similar or worse problems.

It is important not to overreact. Since March, Ventura has taken decisive action to trim our budget, making $4 million in cuts and preparing for even deeper revenue reductions this year. We've also postponed or cancelled several million more in capital projects. But even in tough times, we must continue to adequately serve our community and invest in the future by maintaining our vital infrastructure, including our streets, water and sewer systems.

With the presidential election just a month away, one thing is certain: the next president will take office in January facing the most difficult economic challenge facing the nation since Franklin Roosevelt in 1932. With the nation running all-time record deficits and with California not certain it can even pay its bills without a loan from the federal government, we will continue to work responsibly at the local level to live within our means and do our best to cope with global forces beyond our control.

Placemaking

I just returned from Denver, where I was invited by the Urban Land Institute to moderate a panel on "public-private partnerships" at their conference on "Placemaking." That's the term that's been coined to distinguish new development that seeks to live up to the classic standards of building great places instead of copying the generic crap that has characterized most real estate development during the last half century.

Considering the economic climate, the attendance at the conference was suprisingly strong -- more than 300 developers, architects, local officials and real estate professionals journeyed to the Mile High City. But there was a clear sense that the real estate meltdown (figures were released today that new home starts hit a 17 year low last month) may force a drastic rethinking of conventional suburban sprawl.

At the heart of the unfolding Wall Street crisis are speculative bets on housing that have turned out to be reckless at best, fraudulent at worst. Money was pumped into a "housing sector" without regard for the sustainability of the rising values -- particularly the underlying ability to support them.

That's causing more and more voices in the real estate industry to insist that "next time" more thought and planning needs to go into the location, type and mix of housing. In a word: "Placemaking."

That's the same aspiration that Ventura has been pursuing since adopting a new General Plan in 2005. The City Council adopted a complete new code for Downtown and later the Midtown Corridors. Staff is working to complete new codes for the Victoria Corridor and the Saticoy and Wells areas. The goal in each case is to establish "the highest standards of quality in architecture, landscaping and urban design," as outlined in the 2005 General Plan.

But the retooling needed in the real estate industry is as profound as the one facing Detroit automakers. Just as GM and Ford recklessly pushed gas guzzling vehicles, the big developers pushed a gas guzzling landscape of housing tracts, shopping centers and business parks. With higher gas prices, rising concern over climate change and new consumer attitudes toward conspicuous consumption, both industries are talking about "going green." Actually doing that will not only require rethinking, however. It will also involve new skills and hard work to figure out how to produce what America wants and needs.

An example of that challenge is the new "Belmar" development in suburban Lakewood that I toured as part of the Denver conference. That town of 146,000 grew up around a major regional mall instead of a downtown. But the mall didn't keep pace with the times. Civic leaders partnered with a far-sighted developer to raze the 100 acre site and build (from scratch) the downtown that the city never had.

Several hundred million in public and private investment has produced a working model, if not a fully realized vision. The ground floor space at the core is leased to major tenants, a Century Theater and Whole Foods are doing well and the office space went quickly. On weekends, the place draws a crowd and the wintertime ice rink is a big hit. But there are also empty parking lots where planned housing is stalled by the market.

The community of Lakewood is delighted by finally having at least the beginnings of a "downtown." But a project of this magnitude is far harder to plan, finance and build than a generic shopping strip or a tract housing project. The focus of the conference was on that challenge, including the pointed design issues of building more compact communities.

I was particularly struck by an element that others might not have focused on. One of the new parking structures is across the street from townhomes. The original low-cost, high efficiency design had parking on the ground floor. But before construction, the developer modified the design to replace the outermost row of parking on the frontage with a series of simple, glass-fronted "boxes." These have been leased to start-up art and artist studios and galleries. It is a far more compatible compliment to the residences across the street.

It is this kind of attention to "placemaking" that will determine the long-term value of what's built. It is precisely what has been overlooked in the myopic pursuit of short-term profit by most real estate developers -- and often their retail tenants.

That was the closing message from the conference, delivered by Christopher Leinberger, a renowned author and national real estate expert, who has been a developer himself. The market for what Leinberger calls "walkable urbanism" -- quality places built to human scale -- has huge potential, while the market for "drivable suburbanism" is tanking. Already, residences in walkable urban places command a 40% to 200% price premium on a price per square foot basis over nearby suburban housing. Demographics and economics will only increase that divergence, he argues.

That prediction has both optomistic and troubling aspects for Ventura. It bodes well for our Downtown, Midtown and Westside as well as infill development that incorporates more walkable, human scale design and a mix of adjacent uses to make great places. But it also poses long run concerns about the aging shopping centers and isolated housing tracts built during the 1960-90 suburban boom.

In today's volatile economy, predicting the future is risky business. But if the folks that gathered in Denver are right, this real estate market meltdown may have a silver lining -- forcing our entire country to think more about building places that are economically, environmentally and socially sustainable over time, instead of chasing bloated short-run quarterly profits. That's an imporant lesson -- and looking at the carnage on Wall Street, it's long overdue.

Community Memorial Rebuilds

Last night, the Design Review Committee, the City Council and the Planning Commission gave thumbs up to the design concept for a new Community Memorial Hospital.

Practically every hospital in the state is faced with replacing their existing facilities.

Why?

Because the State passed a law requiring them to meet stringent new earthquake standards designed to ensure that hospitals will not only withstand a major shaker -- but will be able to stay in full operation to handle casualties.

Community Memorial Hospital isn't part of a big national chain. It is a local non-profit that traces its history back more than a century to the first hospital in our county. It will cost around $300 million for the full cost of making the transition, so the hospital is under enormous pressure to hold down costs and produce a new facility that will improve their efficiency and service levels to their patients.

Given the recent flap over the height of the new County clinic nearby, there is (pardon the pun) "heightened" concern over a large new building. But the City's first concern is that the new hospital campus fits in with the surrounding neighborhood at the ground level. Too many hospitals have either moved out to a remote location where they can sprawl behind a big fence or end up imposing blank and ugly walls that kill pedestrian life in an existing neighborhood.

So the City encouraged CMH and their design team to hold a public "charette" to get input from Midtown residents and businesspeople as they worked to fit their new hospital into the existing area.

There was strong support that they succeeded last night. The hospital plans a square or plaza in front of their new entrance that will be designed as both an attractive entryway and a new public amenity in the Five Points district.

The hospital's preliminary architectural design didn't get rated as highly. But there was optomism expressed that the same collaborative spirit that led to agreement on where the building will go will result in the landmark new building one that Venturans can take pride in.

For more info on the design, read the staff report prepared for the meeting at:

http://www.ci.ventura.ca.us/newsmanager/templates/?a=4470&z=43&template=new_meeting_template.html

California State budget crisis by the numbers

This from today's Sacramento Bee:

• 70: Days into the 2008-09 fiscal year without a state budget.


• $4.25 billion: Payments that state Controller John Chiang couldn't make in July and August because of the missing budget.


• $7.6 billion: Payments that will go unmade in September if there's no budget.


• $1.1 million: Amount that state lawmakers will earn this month, more or less (though they won't be paid until after a budget passes). This doesn't include per diem.


• 0: How many times California lawmakers and the governor have taken this long in years past to finish a budget.


• 873: Number of bills that state lawmakers have passed but not sent to Gov. Arnold Schwarzenegger.


• 342: Senate bills being withheld.


• 531: Assembly bills being withheld.


• 0: Number of bills Gov. Arnold Schwarzenegger said (on Aug. 6) that he would sign before there was a budget.


• 1: Number of bills Schwarzenegger has signed so far. (He broke his pledge in order to sign AB 3034, which amended the high speed rail measure on the November ballot.)


• 10,300: Temporary employees the governor laid off by executive order.


• $6.55: The federal minimum hourly wage -- and the amount Schwarzenegger wants to pay state workers to conserve cash during the budget crunch.


• 0: State workers who have been paid the federal minimum wage.


• 85: Days since the state constitutional deadline (June 15) to pass the 2008-09 state budget.


• 125: Days until the constitutional date (Jan. 10) that Schwarzenegger must present the 2009-10 budget.

Water and wastewater rate increases on Council agenda

Because the people of Ventura own their own water and wastewater utility companies, each year the rate setting decisions are made in public. And as a result of court decisions in other communities, we now notify each residential and business rate payer to let them know they have the right to "protest" any increases. If a majority protest is lodged, the Council cannot override it.

Both our Water ($22M budget) and Wastewater ($15M budget) utility operations are "enterprise funds" that are kept completely separate from the General Fund.

So what do customers get for their money? Clean, healthy drinking water reliably delivered to more than 30,000 homes and businesses -- and healthy and safe disposal of the wastewater that goes to the sewers.

Just like city government (and family and business budgets) we've been taking a hard look at how we spend every nickel in water and wastewater. To keep a tight rein on rate increases, we've reduced expenditures and increased efficiencies and even postponed major capital investments in our system. We're also seeking to market the City's "allocation" of State Water which we pay for, but don't use, under the terms of a deal made decades ago.

Even with aggressive cost cutting, however, many expenses have increased, just as they have for families and businesses. Fuel and energy, which we use to pump water out of the ground and into the homes and businesses of our customers, has obviously jumped in price. We are also paying for major increases in water we purchase from Casitas Municipal Water District. That rate jumped 30% last year and another 10% this year and United Conservation Water District increased their pumping charges by 40% last year.



As an older community, our pipes and other facilities still need regular maintenance and gradual replacement to avoid costly and disruptive breaks. But, by far, the biggest cost increases have come as we've invested tens of millions in upgrading our water and wastewater treatment facilities to meet State and Federal Clean Water Act mandates. We simply have no choice in this regard. Both Santa Paula and Fillmore kept rates low while they neglected investing in modern treatment plants -- with the result that on top of paying hefty fines, they had to more than double rates to pay for urgently needed upgrades.



Nobody likes paying more for a basic necessity like water. But Ventura rates remain on the low side in our County. The proposed Water and Wastewater Rate increase is 7% for both water and wastewater for each of the next 2-years. If approved by Council, these increases will be effective November 6, 2008 and again on July 1, 2009. Brochures went out to all bill payers explaining the increase and a public hearing will be held at the September 22 Council Meeting, which begins at 6 pm.


Our staff are happy to answer more detailed questions. You can call Customer Service Manager Gary Lee at 652-4523 or Asst. Public Works Director Vicki Musgrove at 677-4133.

California taking on sprawl

Ventura County residents sometimes take for granted the unusual geography and regional policies that protect us from the worst excesses of suburban sprawl. In fact, you often hear gripes in our communities about why we can't live in nirvana where the cost of living and traffic aren't like they were ten, twenty or even fifty years ago.

But as a State, we have paid a huge price not so much for how much we've grown in recent decades as how we've grown. We've paved over farmland, sensitive habitat and valuable open space. We've created huge obligations to build and maintain infrastructure to serve a chaotic and auto-dependent landscape. We've watched the erosion of a sense of place and its replacement by a numbing sameness. And the traffic, pollution and economic cost of this kind of development has far outpaced the actual rise in population.

Amazingly, it has taken a global, not a local, threat, to spark action in Sacramento. Recognizing that we cannot meet the aggressive goals for reducing greenhouse gases required by the State's landmark "Climate Solutions Act," legislation is headed for the Governor's desk to finally address the State's abysmal record on controlling sprawl.

Called AB 375, it has generated national attention, including this story in today's New York Times:

http://www.nytimes.com/2008/08/29/us/29sprawl.html?ei=5070&emc=eta1

The bill itself is the product of major reworking to gain acceptance by a wide and diverse coalition of environmentalists, builders and local government. The heart of it directs long overdue coordination between the State's existing transportation and housing planning requirements and the new mandates being developed to fight global warming. This will happen, not at the State level, but at the regional level. That's where it belongs, but most regions in California are ill-prepared to take on this new responsibility.

How effective the new legislation will be really depends on local communities beginning to think (and act) regionally. Will the new legislation foster that goal?

Ventura County has the opportunity to be an important test case. In the months ahead, we'll see how much attention (and traction) this opportunity receives.

A positive indication, however, was last year's unanimous resolution of the "Regional Housing Needs Allocation" process in our County. Faced with a non-negotiable share of the total regional need to make room for more housing for low and moderate income families, the ten cities and the county could have battled each other over what share each community would shoulder. That's what happened in the other five counties of our region. But Ventura County unanimously agreed on a formula that no one liked, but everyone could live with.

Building on that success, we can now aim higher. We can rethink our parochial approaches to regional transportation and the damaging competition over sales tax dollars. We can work together to protect the environment, while bringing new investment back to older communities with a "one for all, all for one" approach. While that may seem idealistic, it's our best chance to safeguard the quality of life and prosperity that we too often take for granted.