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What’s Killing Sacramento’s Suburbs?

US Council of Mayors: Tom Cochran (director), Kevin Johnson (2nd VP), Michael Nutter (President), Scott Smith (Vice-President.)

On July 19, the United States Conference of Mayors released a report entitled “Metro Economies Report: Outlook-Gross Metropolitan Product, and Critical Role of Transportation Infrastructure.” From this snooze-worthy title, the Sacramento Bee produced an article titled “New report says Sacramento’s economy was among worst in U.S. last year.” (http://www.sacbee.com/2012/07/19/4642197/new-report-says-sacramentos-economy.html )

The Bee article also includes a quote from Sacramento Mayor Kevin Johnson, second vice chair of the US Conference of Mayors: "The quality of this nation’s workforce and its economic growth is directly tied to the quality of education. We must focus on ensuring our children access to the best education possible to prepare them for the future challenges of the expanding global economy." However, the Bee article did not include a link to the study or the source of the quote, which might lead a reader to believe that the focus of this study was on the quality of education in American cities, and how awful Sacramento is. A look at the study itself demonstrates how out of context both this quote and the Bee article actually are.

The United States Conference of Mayors Website: http://usmayors.org/
The Full Report: http://usmayors.org/metroeconomies/0712/FullReport.pdf
Key Findings: http://usmayors.org/metroeconomies/0712/KeyFindings.pdf
The Press Release: http://usmayors.org/metroeconomies/0712/PressRelease.pdf

The full report is pretty thick—it includes a summary explaining the meaning of gross metropolitan product, including the highest and lowest of the United States’ 100 largest metro areas (the measure that puts Sacramento near the bottom.) But, despite Johnson’s quote, the report does not discuss the importance of education at all. The word “education” appears twice in the entire 141 page report (including appendices), in both cases referring to “education & health services” as an overall sector of the job market, not referring to the state of education and its importance to the workforce. Johnson’s reference to education seems like a non sequitur when compared to the actual subject matter of the report.

The big issue, according to the report, is the state of America’s transportation infrastructure, indicating that American spending in this sector lags far behind that of Europe, and even farther behind China. The report begins its analysis with, “Infrastructure repair and reinvestment is a crucial means of jumpstarting the US economy and positioning the nation for future economic growth. These investments stimulate our economy in two ways: first by creating jobs directly during planning and construction phases. Second, by creating jobs in the long-term by making the nation’s transportation lines less congested, more efficient, and more competitive.” (p. 6) The report also states that these investments should be focused on existing metropolitan areas, where potential returns are the greatest, and where existing congestion can be relieved by providing transportation alternatives. The report defines transportation infrastructure very broadl. Modes mentioned include shipping and ports, air transportation, rail, highways, and public transit. The report also cites California major metro areas as places where commuter costs were kept down by increases in public transportation, carpooling and telecommuting, while pointing out that congestion costs skyrocketed in inland metro areas like Bakersfield, Riverside, and Oxnard-Ventura, where fewer transportation investments were made.

The report also identifies the chemical and plastics industry as one of the hottest growth areas in the United States, attributed to the drop in natural gas prices brought on by new methods of gas extraction (better known as “fracking.”) This job sector is very minor in Sacramento’s metro area, employing just a few thousand workers.

The Numbers

The report is mostly a series of appendices with statistics of American metro areas. Sacramento’s metro area, the Sacramento-Arden-Arcade-Roseville MSA, includes Sacramento, Yolo, Placer and El Dorado Counties. Rather than indicating the health of the city of Sacramento alone, these figures reflect our regional situation—as much as some try to deny it, cities like Roseville, Folsom, Citrus Heights, Rancho Cordova, West Sacramento, Davis, Woodland and Elk Grove are all tied together economically and socially with the city of Sacramento. Our economy had a value (Gross Metropolitan Product, or GMP) of $93.29 billion in 2011, about 5% of California’s nearly $2 trillion overall economy, and roughly proportional to Sacramento’s population, about 2.2 million of California’s about 40 million people. That $93.29 billion puts us a bit behind metros like Columbus, OH and Austin, TX, and slightly ahead of Las Vegas, San Antonio, Milwaukee and Nashville. Page 56, a chart of real GMP and employment growth rates, identifies our metro as having lost 0.3% of gross metro product in 2011, but having gained 1.9% in 2012—another chart (Real GMP Growth Rates) on page 71 indicates the trend since 2008 is an even more dramatic reversal, from a drop of 3.0% in 2008-2010.

The index also lists congestion costs, associated with transportation infrastructure. Metros with the highest costs in this sector are generally the biggest metros in the nation, like Chicago, Washington DC, Los Angeles, Houston and New York. Sacramento is ranked 45th, with relatively little increase in congestion. Sacramento’s metro area ranks 41st in freight tonnage, shipping more than 110 million tons through the Port of Sacramento, Union Pacific, city highways and roads, and air freight hubs like those at former Mather AFB. This represents 4.4% of our gross metro product; despite our traditional role as a transportation hub, moving freight is a relatively small part of our metro economy. From 1990 to 2010, our workforce grew from 618,000 to 809,000, and is projected to reach 931,000 by 2020. Our metro population growth in the next 30 years is expected to bring us from 2.2 million people to 3.4 million by 2042.

So, What Was That About Killing The Suburbs?

Okay, so I admit to a certain amount of hyperbole—in part, the title of this article is in response to a Sacramento Business Journal blog post (and following Sacramento Press article) titled “What’s Killing Downtown?” that seemed to focus almost entirely on what was good about downtown, except people spare-change you sometimes and parking isn’t convenient. It’s a non sequitur that had nothing to do with the article, just as the Mayor’s remarks about education (and the Bee’s article about his comments) had nothing to do with the report it accompanied.

The numbers from the USCM report, taken out of context, can be used very easily to make Sacramento look bad—based on our rate of economic growth, things do look pretty grim. But as grim as things have been here since the collapse of the housing bubble, nearby metros like Stockton and Modesto were even harder hit (with 1.0% and 1.7% loss in gross metro product) while coastal areas grew. But by comparison to other parts of inland California, Sacramento’s metro area almost constitutes a bright spot.

In order to get a clearer sense of job numbers, it is necessary to look at labor statistics for the Sacramento metro area (source: http://www.calmis.ca.gov/htmlfile/msa/sacto.htm , http://www.calmis.ca.gov/file/lfmonth/sacr$pds.pdf .) Labor statistics from May 2011 to May 2012 do indicate a drop of about .2% in civilian labor force, but a 1.2% increase in civilian employment. Breakdowns of employment by industry show that only 69,000 of our metro area’s 815,000 workers are in goods producing industries, like farming, mining and logging, manufacturing, and construction. Construction makes up about half of that number, 32,600 workers, a number that dropped from 35,900 just since last year, and from nearly 70,000 during the boom. This abrupt drop in construction jobs was a direct result of the collapse of the housing bubble. Because the Sacramento metro area’s primary consumer product was suburbs, when the market for that product went away, so did a significant portion of the region’s manufacturing jobs. That number has yet to recover, and our suburban areas don’t show much sign of recovery either—many housing and commercial developments on the outer edges of the urban perimeter sit half-constructed, like Elk Grove’s vacant mall, while some suburban tracts were cleared for development but never actually built.

The Sacramento MSA’s largest job sector is the service industry, with more than 500,000 workers, more than 60% of the workforce, in sectors ranging from trade, transportation and utilities, information, professional and business services, health care, hospitality and food service. In the service industry sector, the biggest employment drops were in arts, entertainment and recreation, hotels, publishing, and building supply stores (another effect of the building crunch?) and “nondepository credit intermediation” (otherwise known as the credit industry—no surprise there, another effect of the collapse of the housing bubble.) But overall, the service industry hasn’t fared as badly as construction, having only lost about 10% of its workforce numbers since the height of the boom.

Similarly, the government sector, traditionally considered the Sacramento metro area’s most important “industry,” has also been generally stable. 2011 government job numbers of 224,600 have only dropped about 5% from their high of 238,000 at the height of the boom. Government often has that effect—government centers don’t jump as high during boom times, but they don’t fall as far during crunch times, making them stabilizers of their local economies. While California’s government is facing rough tides, it is unlikely that this state will become any easier to govern anytime soon, or that our state will be able to manage its affairs without a government. If the future of the Sacramento metro area’s economy is to diversify beyond its current base, the answer could be to promote a dramatic increase in manufacturing something other than suburbs for state employees to live in.

All this brings us back to the actual focus of the US Council of Mayors’ report—the need for better transportation infrastructure. In this sector, Sacramento has some positive signs and even some things to crow about. While assorted arena projects have crowded the headlines of the past year, work on Sacramento’s intermodal rail depot and improvements to the Union Pacific freight mainline have continued unabated, and are nearing completion. Federal TIGER funds to rehab the passenger depot will modernize and restore the station. An expanded passenger depot provides Sacramento with the capacity for more passenger rail transportation, which can ease road congestion by shifting commuters to other transit modes. Straightening out the UP mainline means more freight passing through the Sacramento metro area more quickly, promoting traffic in our direction and away from other transportation bottlenecks. Our expanded metro airport is another plus in this department—as are recent improvements to the Port of Sacramento, on the Yolo County side of the river.

Recent incremental improvements to service on Regional Transit bus and light rail lines, and the opening of the “Green Line” to Richards Boulevard, are a starting point, but as others have mentioned in response to the article about the state of downtown, Sacramento’s metro area needs serious improvement in public transit—more light rail, more buses, more streetcars, more regional bus and heavy rail. This brings us again to the problem of the suburbs. New development on the outer edges of the urban boundary is the hardest to serve with transit, and thus the biggest generator of automotive traffic, and congestion of our existing transportation network. Every new subdivision means more cars competing for space on the same aging highway system—and adding lanes to a highway system generally does not relieve congestion, it merely spurs more horizontal growth. On the other hand, infill and development within the existing urban footprint, not just downtown but in nearby neighborhoods and municipalities like West Sacramento, are easier to serve by transit and other modes. Every future resident of West Sacramento’s riverfront development or the CADA lofts on R Street is one less commuter jockeying on the highway with all the other commuters from Elk Grove, Roseville and Rancho Cordova. During the boom, what was killing the suburbs was the next wave of suburbs—and in its wake, the shift in economic priorities that reduced demand for that consumer product. As the center of Sacramento’s transit network as well as its economic hub, adding transit modes to reach Sacramento’s central city make traffic (and life) easier for residents of outer suburbs by relieving congestion while also facilitating economic growth.

So, maybe Sacramento isn’t so bad off when it comes to near-future transportation infrastructure development, but we have plenty of room for improvement and development of other sectors of our economy. What about manufacturing? If the country really needs more transit infrastructure, and national priorities follow the US Conference of Mayors’ recommendations, then there will be opportunities for metro areas able to manufacture the things needed by transportation networks—like trains, buses, trucks, streetcars, cars, and the multitude of devices and materials needed to build and upgrade transportation networks. Facilities like Siemens, who manufacture streetcars, light rail vehicles and even heavy-rail electric locomotives, would grow in importance, and there is room for more manufacturing capability. Transit modes powered by electricity will depend on power generation capacity, and Sacramento’s region already has a head start in renewable energy technology via SMUD. Even bicycle manufacturing could become an important economic sector, as interest in cycling grows and cities focus more on economical and compact bike infrastructure to facilitate getting around city centers and nearby suburban neighborhoods. The skills and energy of workers who once built suburban tract homes could be re-harnessed to build transportation infrastructure, vehicles, and the new kinds of housing and commercial places that will be better suited to these upgraded transit networks.

I realize that not everyone is as into numbers as I am, but by looking at the numbers, and the real subject matter of the US Conference of Mayors report, I came away with a very different assessment of Sacramento’s situation and near-future priorities than the Sacramento Bee. Hopefully, those willing to look past the surface and examine the details will come to similar conclusions, and act on them.

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