Sitting at a Fortuitous Crossroads

Some recent press has been given to a consequence of the “new urbanism” trend that we in the US are experiencing.  Whether because of Millennials’ delayed household formation, the increasing numbers of childless Baby Boomers, or simply a cultural shift from a suburban to an urban lifestyle, city living is way cool with even small and mid-sized American cities becoming destinations.  However, as resources are poured into destination cities from DC to San Francisco, Portland to Salt Lake, and Grand Rapids to Chattanooga, a new issue has cropped up: displacement of poorer, largely minority residents.

Two recent pieces caught my eye, both based on a study by Eric Tang of the University of Texas and the Institute of Urban Policy and Research Analysis.  To simplify his study’s model here, Mr. Tang looked at large cities and divided them into “progressive” and “conservative” based on historical voting patterns.  He then looked at the percentage of minority populations in each city.  While we might expect “progressive” cities to be more racially tolerant and thus have growing minority populations, Tang found that for the most economically successful of these cities, the minority population was falling as a percentage of the overall population.  And in one, Austin, which is regarded as this decade’s gold standard for urban success, the African American population is decreasing at an absolute rate.

So of course that got me thinking about Pittsburgh.

Pittsburgh is not yet in the same economic powerhouse league with San Francisco or Austin.  Our job creation quite simply is anemic at best.  We’re still building our momentum.  But momentum is building and now is as good a time as any to think about the consequences of success.  The new urbanism found in East Liberty and Lawrenceville, which is spreading to Garfield and Bloomfield, will eventually make its way to the Hill District and Homewood.  What we want for all these neighborhoods is a social, economic and racial mix.  That’s the ideal and it will never be perfect.  The percentages and type of mix are not as important as the freedom to have such.

Pittsburgh stands at an exciting crossroads where its position as an economic powerhouse and destination city is being re-established for this new millennium.  We need, indeed must make it a goal to raise the living standards of all the City’s and region’s citizens.  Those people who have stuck by Pittsburgh and western PA through the bad times and the less bad times deserve to benefit from renewed growth.  We simply cannot lazily rely on or hope that in-migrants with more desirable demographics replace current residents in our region, City and neighborhoods.

But what’s the prescription?  I’ll start with this one: education.  Better educational opportunity is the standard answer but it is, proven time and again, the absolute best, most efficient and effective solution.  Programs like the Pittsburgh Promise are prime examples of what’s needed.  Institutions like CCAC as well as outlying counties’ community colleges should continue developing programs targeting local workforce needs.  And our four year colleges and universities need to further encourage “entrepreneurial DNA” within their student bodies while taking full responsibility to provide the infrastructure that allows and encourages that talent to stay in the region.  New employment grows from these seeds and outside companies migrate into places where the workforce is trained, talented and smart.

A Good Move at PIT

It is widely reported this week that Pittsburgh International Airport – PIT in the language of airline personnel and frequent fliers – experienced a 1.5% monthly increase in passenger traffic compared to the same month a year ago.  More importantly, this is the fifth straight month of passenger increases.  Travel media names from Ben Mutzabaugh in the “USA Today” to Michael Boyd the oft quoted airline analyst are calling the bottom for PIT’s traffic declines and we can look forward to gradual growth for our once impregnable fortress hub now turned into an O&D, origination and destination, airport which means we must rely on growth in the local economy and its flying public.

I’ve often wondered why Pittsburgh, with a regional population over 2.5 million, generates relatively little airline traffic when metro areas half its size generate much more.  One example is Austin, TX with a metro area population slightly more than 1.5 million.  Yet their airport, which is not a hub for any airline, last month reached a monthly level of one million passengers.  PIT’s most recent month is reported at 657,000.  Can the difference be in tourist levels?  That has a bit to do with it considering Austin’s signature events such as SXSW and its ACL Music Festivals.  But I doubt that explains 50% higher numbers.

My theory on this is related to what I consider the best news out of this week’s announcements for PIT: Sun Air Express will be using PIT as a regional hub for service to small-market airports in Pennsylvania.  I believe a big part of the high passenger numbers in cities like Austin as well as traditional airline hubs such as Denver, Salt Lake City and even Dallas and Houston stems from their position as true transportation alternatives to driving.  Distances are greater as we travel west.  Populations simply become comfortable flying between business centers and then, by extension, geographically dispersed family and friends.  When Southwest Airlines started the concept of short, quick, inexpensive flights between cities in Texas, a transportation planner friend of mine pointed out that Texas suddenly had its own “Metrorail link” similar to the Boston-Washington corridor.  It was just one that took to the skies rather than the rails.

I believe there can be demand generated in sufficient numbers that Pennsylvanians [and maybe West Virginians and western Marylanders and some Ohioans] will use this sort of service for trips that would have meant car travel and all the problems that form of transport presents.  Will it take PIT to the million-passenger-a-month level?  Not by itself certainly.  But it’s part of the plan that will re-establish PIT as a larger, more important airline “hub”, even without status as a hub to a major carrier.  A good move.

This an’at

I have both said it and blogged it before and I will do it again here: Holly Brubach is a joy and a great resource for Pittsburgh.  Her proposal to turn the Granite Building into a true boutique hotel is very exciting.  She is the real thing and developing a one-of-a-kind hotel property exhibits the integrity that reflects the Pittsburgh’s narrative.  The news blog site NEXTpittsburgh.com, which itself is awesome, quotes a story of how a local business executive told her boutique hotels were for cool people and “cool people don’t visit Pittsburgh”.  Let’s have less of those like him and more of people like Holly.

This week Pittsburgh was named on the Huffington Post as one of the 40 Prettiest Cities in the world.  Who knows who throws these lists together but it was nice to be noted alongside Venice, Paris, Sydney, Rio and the other more usual cast of characters.

The latest employment numbers for metro Pittsburgh are, to me, perplexing.  So many statistical measures of the region’s economy are positive: businesses are opening, young people are coming into the city – or simply staying after graduation, and the real estate development activity is higher than it’s ever been.  So while unemployment is declining, there is still a relatively low labor participation rate in western PA coupled with anemic job creation.  7,400 new jobs were created in September 2014 but most local economists say that something from the high teens to 20,000 new jobs a month are needed for a labor pool of 1.2 million workers.  What’s up?  Taxes?  Heck, look at New York, New Jersey, Minneapolis or even across state at Philly.  High taxes don’t seem to hold them back.  Lifestyle?  Can’t use that excuse any longer especially when Pittsburgh keeps appearing on so many “hot lists”.  So what gives?  More to think about.

It Takes a While

A couple items in the news this week reminded me that Pittsburgh’s current growth spurt is still in its infancy.  As I recently remarked to a long term Pittsburgher, the current generation of residents has no concept of the paroxysm that was the collapse of the steel industry.  A testament to the region’s resilience is that while something less than 20% of jobs were eventually lost and for most western Pennsylvanians, a semblance of the good life was still lived.  Pittsburgh and the region are regaining strength, rebuilding their economy practically from scratch.  It’s as if it were newly settled, akin to cities on the West Coast after World War II.

                                  

This week, an online piece about one of the Silicon Valley’s titan companies mentioned that it started with a visit to the Stanford Research Institute [SRI] in 1959.  It then took another 10 years for that particular company to develop into an ongoing entity, and still more time to become a Fortune 500 name.  So my interest piqued, I looked at SRI’s beginnings and discovered it was founded in 1946; immediately following WWII.  That’s almost 70 years of work in the Bay Area.  And even Xerox’s Palo Alto Research Center [PARC], which among other things played a major role in Apple’s early development, was started in 1970.  Note that it’s only been in the last dozen years that UPMC’s Hillman Cancer Center has hit its stride and this year’s establishment of The Brain Institute is a comparative newborn.  How many years will it take both these centers to spin out not only important breakthroughs in their fields but the expected economic benefits?  Time obviously will tell.  Patience is called for.

Related to this is the issue of whether Pittsburgh’s nascent entrepreneurial spirit is growing and do we ultimately have what it takes to re-establish as a world technology center.  Of course we do, as does anywhere else on earth if given freedom to think.  But I do wonder how and when that special Petri dish of circumstances forms to ignite the creative geniuses.  We’ve all heard that Michael Dell started his computer company in his University of Texas dorm room.  But in that same period at UT, John Mackey was dreaming of the natural grocery store that became Whole Foods and his lesser known housemate on campus, Kip Tindell, started his business plan for what became The Container Store.  Billion dollar companies all.  Why did UT during that period, long before high tech start ups were spoken of colloquially everywhere, provide ground for those ideas and not Pitt or CMU?  I’m just asking.  Time to make up for lost time.

A Delicious Coincidence

The Bookmark bookstore in downtown Oakland, CA is a great little indie with new and used books that supports their public library.  A few months back I picked up a copy of “Cheesemonger – A Life on the Wedge” by Gordon Edgar.  It finally made it into my summer reading rotation this past week.  Edgar is a punker turned cheesemonger-of-the-highest-degree.  He notes that it was thought provoking how he went from someone who simply needed a job, and found one at San Francisco’s famed Rainbow Grocery Cooperative, to a speaker at the American Cheese Society’s annual conference.  Who knew there was a cheese conference?  Who knew there was a cheese society!

And then the next day, by coincidence [though metaphysics teaches us there are no coincidences; only synchronicities] the Pittsburgh “Post Gazette” featured a story on two Pittsburgh cheesemongers attending this year’s ACA Conference.  And interestingly, their description of their first conference echoes stories Edgar relayed about his early attendance: awe over the cheese knowledge gathered and being star struck by the culinary firepower.  Here’s the link to the P-G story.  http://www.post-gazette.com/life/food/2014/08/21/Local-cheesemongers-take-a-cheese-field-trip/stories/201408180112

What’s great about the P-G piece is that it was 20 years ago that San Franciscan Edgar attended his first cheese conference, returned to his grocery cooperative and raised the bar on the City’s food culture.  That’s now happening in Pittsburgh.  All things happen in their own time so Pittsburgh might be 20 years behind the City by the Bay when it comes to food appreciation, but by my observation, it’s catching up fast.  From what I see, read and eat in Pittsburgh, the food culture has practically exploded.  What took other more recognized foodie towns decades to develop, Pittsburgh has taken on in the space of about 5 years.  Goodie foodie for us.  The momentum is unstoppable and it all goes to making Pittsburgh, like any city, a more livable and enjoyable place.

Revving Up Pittsburgh

A piece in this week’s “Pittsburgh Business Times” TechFlash section detailed a roundtable meeting Mayor Peduto hosted to discuss accelerating Pittsburgh’s technology sector.  Giving emphasis to these types of issues is a step forward and keeps this particularly important issue at the forefront.  The new Mayor should be praised for this type of initiative.

I noted the items discussed and some of the suggested actions needed to address perceived failings Pittsburgh and its region’s resources.  As a not exhaustive summary, mentioned were: lack of non-stop air service to the West Coast, a generally poor transportation grid, assistance to startups in obtaining customers, an organized marketing effort touting Pittsburgh’s entrepreneurial scene, a defined process for networking startup businesses and local resources, and consideration as “desirable” businesses those other than “high tech”.

All of these ideas are important, especially taken as a whole.  I believe I’ve made this point before: that an ecosystem needs to develop where each aspect feeds on the others and that in turn accelerates the overall economic development.  Is this circular logic?  In a way, yes.  But how did “creation” begin?  With a Big Bang we are told.  But what initiated the “big bang”?  What was the ultimate void from which the universe exploded?  No one has still answered that one.  Well, city and regional [and national] socio-economic ecosystems are similarly created, especially in a knowledge based economy that doesn’t depend on natural resource availability [as a nascent Pittsburgh did when coal, iron ore and limestone came together to start a steel industry].

I agree with one of the roundtable participants who stated with appropriate faith and belief that Pittsburgh feels like it’s on the edge of another rebirth – something is about to explode are words close to what was said.  I agree.  You can feel a big bang about to happen.

However, allow me to add an item that I still believe is most important: money.  Or a more precise definition: the local availability of financial resources, since “money” sounds a bit snarky.  One roundtable participant commented that when a local startup gets to a certain level of growth, outside investors come in and “harvest the companies and take them away”.  Well, outside investors do that everywhere and all the time.  Pittsburgh is not alone in that respect.  The financing is concentrated in the Silicon Valley, Boston, Seattle and increasingly, New York.  So that will continue until Pittsburgh develops more of an angel investor, later stage investor, and venture capitalist sub-ecosystem, shall I call it.   And while that can be encouraged by the Mayor’s office, or local economic development agencies, it mainly comes from individuals who believe in a location [Pittsburgh] and will invest their success in the efforts of others.  Here’s hoping more of those for Pittsburgh.

Free The August Wilson Center

The ongoing saga of the bankruptcy sale of the August Wilson Center is an embarrassment to Pittsburgh and hearkens back to the bad old days of industrial city machine politics.  Except that the “machine” in this case is a quasi-government agency, the Urban Redevelopment Authority.  As Pittsburgh grows into an attractive investment location for private development, the value of the URA has diminished.  But the URA, instead of realizing that their admirable efforts in previous decades have helped make this possible, is instead using this particular case to block the Center’s recovery from initial missteps in a bid to preserve their political power.

As Dollar Bank has stated in its most recent court filing, a high rise tower of some sort was always contemplated as part of the overall development.  Early in my career life I was a banker on Wall Street, schooled in the logic of lending.  I can absolutely imagine Dollar Bank staff viewing their initial loan for the Center as an investment that would ultimately be taken out – that is, paid off – by proceeds from a more fully utilized development.  I suspect it was the faith Dollar Bank placed in the ultimate growth of the downtown market that led them to make this risky loan.

The URA has already “peed on its own shoes” as they in sales situations.  By making this overall process so difficult for Dollar Bank, I can say with confidence that no other credible financial institution will ever again enter into a lending situation where the URA is involved.  By reaching for a one-sided solution they have ensured their own demise.  Further, they are denying downtown Pittsburgh the chance for a new “luxury hotel” to be built.   Think of the possibilities. We know there is demand downtown for another 4 or 5-star hotel property given the success of The Fairmount Hotel.  Marriott’s Ritz Carlton brand as well as The Fairmount’s fellow Canadian chain The Four Seasons, have holes in their listing with no properties in Pittsburgh.  Either one of those or any number of others are a natural for that space.

But the worst indictment of the URA’s actions is the obvious abuse of public funds that are involved.  That’s taxpayers’ money they are playing with and Pittsburgh and Allegheny County taxpayers should be outraged given the many budget shortfalls still coming their way.  And as part of the URA’s plan, they want the Pittsburgh Foundation to chip in some millions of dollars; money that could be put to other uses not as attractive to private investors.  Sadly I believe there is not much to be done at this point other than let this soap opera play to the end.