Orlando

Florida’s Quick Rebound

Richard Reep — Wed, 18 Jan 2012 00:38:28 -0500

Adding nearly 119,000 people in 2011, Florida has capped a decade of steady population increase to see the state grow 19% since 2000. Despite 2009, an historic year where more people left than arrived, the overall net growth of Florida has yielded two additional congressional seats, moving the state well on its way towards the becoming third most populous state in the nation. This ascendancy brings new responsibility to the shoulders of the state’s leaders, and the direction this state takes in the coming years will depend upon how Florida reacts to this influx of new population. It is time for true leadership to find appropriate voice for our state on the national scene.

Contrary to the predictions of many within the urbanist intelligentsia, Florida’s farm counties grew the fastest. Osceola County, just south of bustling Orlando, grew by 55%; sleepy Sumter County, northwest of Orlando, grew by 75%; and Flagler County, home to historic St. Augustine, nearly doubled in population. Tampa, Orlando, and Miami have each seen their healthy share of immigration, but Florida’s rural areas have dramatically increased their appeal over a decade ago.

At first this trend might be puzzling. Lacking urban amenities such as museums, transit, and Starbucks, parts of rural Florida seem almost timeless. Wildwood and Leesburg, nestled in the center of Florida, lack both beaches and theme parks. They have one thing, however, that the urban areas do not have: affordable housing. And this is the elusive reality that must be turned around by Florida’s leadership if the state is to grow in a responsible manner.

The Miami-Dade market has plenty of supply, but the average home lists for $509,000 . Up in Wildwood, the home lists for $175,000, and you get a lot more house for your money. People are voting with their feet for affordability.

It’s not the price alone that seems to be putting people off, however. Naples, which lists homes even higher than Miami, saw growth over the past ten years at a pace two and a half times that of Miami, and is expected to continue to grow at the same pace through 2015. Anecdotally, it seems that newcomers have relocated to their vacation homes after selling off their other high-priced property, usually in the north. They sometimes reduced their expectations of what they can receive for their old houses and then permanently located where they prefer to live. If the buyers are older, they still likely made a nice profit over the past few decades.

In Orange County, meanwhile, relieved realtors are finally starting to say goodbye to distressed properties. Appraiser Lee Barnes commented that “foreclosures and short sales are 40% fewer, compared to this time last year,” and in an economy fueled by growth, the welcome sight of occupied rooftops means that commercial real estate is beginning to come back. In fact, Orlando is near the top of the list in expected home price gains for 2012, a dramatic turnaround for the region.

Florida’s comeback is timed with some key changes in regulating real estate development. With state oversight all but vanquished by the governor, starving local counties welcome the property tax dollars associated with new growth. No other revenue, apart from a sales tax, provides much cash to operate government in the Sunshine State. This makes growth a priority.

But economic activity occurs in two forms: growth (making more stuff) and development (making stuff better). Quietly, in the past decade, Florida has added biomedical research clusters to its twin engines of growth and tourism, and this promises to increase greater resilience to the state economy.

Some signs, however, point to Florida abandoning this strategy and continuing its boom-bust mentality. The Governor, already warning the legislature of budget cuts in 2012, has expressed disappointment that the job creation return is poor on the State’s venture capital invested in bringing Scripps, Nemours, and other cutting-edge research organizations. He claims that are simply not adding jobs fast enough for his taste. Abandoning these investments could mean that the organizations reduce their presence or even abandon the state.

At the same time, Florida’s cities seem to be uncertain about how to tackle the problem of adding density without reducing affordability. Land prices haven’t wavered much in the recession, with stubborn property owners holding on to assets that won’t sell, and they may benefit from this land-banking strategy in the long run. Many who escape the Rust Belt and come to Florida express shock at the cost of living in the Sunshine State and are further dismayed over the quality of schools and surprising amount of congestion. This mismatch between cost of living and quality of life may be part of the reason why Florida’s five largest cities were listed among the nation’s “saddest” in a recent Time poll .

Casino gambling, a typical 1990s way to boost revenue, is being entertained by the Legislature, but other ideas should be considered as well. For one thing, investment in the future means a better education system, perhaps a higher priority than ostrich food subsidies (currently exempt from state sales tax ). Closing tax loopholes and fixing some long-broken parts of Florida’s tax code will help gain some badly-needed revenue.

Very large infrastructure projects are also important to make Florida competitive. On the east coast, NASA’s 60-year-old facilities need a major overhaul to continue providing America a spaceport for the 21st century and to pave the way for private space exploration. This will maintain the deep investment in human capital of which Floridians were once justly proud. The spaceport has a great deal of synergy with the National Simulation Center, located in Orlando, which is currently the country’s premier provider of military simulation and training.

In more than one region, the Florida Venture Capital Act has brought world-class biomedical research laboratories, making dramatic advancements in cancer, diabetes, children’s health, and other key areas. Already surging ahead and competing with area like Boston’s Research Center and the Silicon Valley, Florida must keep its edge in this field by continuing investment in the Venture Capital Fund.

On the west coast, the Tampa Port Authority is already preparing for the widening of the Panama Canal, working in collaboration with ports of Mobile and Houston to partner with ocean carriers. Continuing this investment and modernizing the logistics of truck and railroad traffic into the port is critical to make this economic engine prevail in the 21st century.

Such infrastructure investment will improve Florida’s already existing assets, allowing for prosperity and upward mobility to occur within the state. Competing with Texas will be difficult, given Florida’s lack of petrochemical resources, but the state’s native industry, tourism, has already made it a world-class destination. Florida’s leadership has already entered the national stage by saying “no” to high speed rail, but it has yet to define what it will say “yes” to. Without intelligent citizen input, the state will likely fall back on its traditional pattern of being a passive receiver of investment and people, but not a creator of great new enterprises.

In contrast to states like California and Texas, Florida has been willing to be eternally passive; Disney World is a classic example. Florida, a grateful recipient of this California enterprise, has benefitted secondarily, but the real power of this company still resides in Burbank. This story is played out over and over again, with real estate developers from Dallas and Atlanta continuing to define the face of the state, aided and abetted by Wall Street investors who see Florida primarily as a waterfront real estate asset with some moderate margins available in between coasts.

It is time for Florida to start doing, instead of being done to. With investment in real infrastructure, good education and intelligent leadership, Florida can assume its responsibility as one of America’s new high-profile states, capable of exporting science, technology, and culture. Our population growth contains within it the seeds of a bright future once we fix what is broken about our beautiful state.

Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

Photo courtesy of BigStockPhoto.com.

Central Florida: On the Cusp of Recovery?

Richard Reep — Fri, 30 Dec 2011 00:38:02 -0500

Central Florida is poised at the cusp of a major turnaround, and its response to this condition will either propel the region forward, or drag it backward. This cusp condition is brought about by a train and a road; neither of which have begun yet but both of which appear imminent. Sunrail uses existing 19th century railroad tracks as a commuter spine through Orlando’s disperse, multipolar city. The Wekiva Parkway completes a beltway around Orlando, placing it with Washington DC, Houston and other ringed cities. Before either gets built, the region deserves some analysis on their combined effect, and how they can be nudged onto a pathway to make the region better.

Sunrail brings with it mythology about how trains affect cities. In what has now become the standard, tired kabuki dance between developer interests and municipal ones.

Not surprisingly, heavy regulation has entered the scene, with the avowed goal of creating dense urban pockets along even largely rural train stops. This has sparked rising property values which may end up frustrating the dream of transit-oriented development (TOD). Affordable dwellings and meaningful employment within a half-mile of a train stop must be created in order to make this development work, but unless Central Florida can spark this, the new train will likely suffer from the same fate as the vast majority of its sunbelt counterparts: low ridership and increasing tax subsidies.

Inserting TOD into 17 locations in Central Florida is a bold experiment. In order for it to work, the rising costs of housing will need to be addressed, and Central Florida can take advantage of this ambition to succeed. Orlando home sales are coming back, thanks to the mild climate and desirable lifestyle. That is very different, however, from guaranteeing that the economics of the rail commuter will make it worth discarding the single-family detached American Dream in favor of a relatively new model that has an unproven track record.

Orlando also seems to be blithely going about the business of creating another ring of traffic around itself, descending into the same level where Atlanta’s Perimeter, the DC Beltway, and other like-kind roads live. The Wekiva Parkway, long considered unneeded, is now being designed to complete the ring around Orlando, and will cross 25 miles of pristine wetlands that is a vestige of once-vast water resources of the region.

The Expressway Authority proposes this ring as an alternative to existing roads to serve the “growth needs of this area,” it conceded recently that this road segment made little economic sense except as a toll road accessing a new suburban single-family home development carved out of the swamps by one of the Governor’s chief fundraisers . The asset value of this ring road may be more private than in the public interest.

Traditionally agricultural land interlaced with wetlands, The Wekiva area to the northwest of Orlando has avoided large-scale Florida style bulldozing. All this will change if the Governor is successful in eliminating water management regulations , freeing up much of Florida, including this corner of Orlando, for speculation.

The local press, quick to criticize Alaska’s Bridge to Nowhere and always ready to jump on environmental issues, meekly ponders the need for this $2 billion highway. Maybe the elevated design, intended to be more ecologically friendly, makes it OK, despite the safety problems and high maintenance associated with this design. Florida’s history is littered with the drawings of many other elevated highways eventually built on grade to save cost. Once approved, the Wekiva Parkway may quickly be brought down to earth as well, displacing wetlands and agricultural land.

The Wekiva Parkway will open up land supply which indeed will allow for more growth. Done right, the asphalt will make land available that could be useful to the area’s economy. It will bring traffic to historic, but presently lonely Sanford, potentially infusing the economy of this once-vibrant rail town. Using principles of scarcity, land values could reflect people’s high desire to live in rural areas with all the services and guarantees that 21st century suburban life offers: fire and police protection, state-of-the-art infrastructure, and free pizza delivery. It could invigorate neighboring towns that are currently struggling for survival.

The risk is that such a road will simply allow more investment into Florida real estate without giving Florida much back in exchange. Florida, already strained to meet its current population needs, should not simply trade another commercial strip for water resources that benefit many species and contribute to the region’s resilience. Rather, development models should emulate the best of America’s conservation development happening in states where water rights are scarce. Connecting local employers with residential areas will enhance the value of both, and strategically keeping rural agricultural areas intact will preserve the region’s present land use diversity.

Well managed development that conserves resources and balances broader needs with private interests will elevate the state’s prospects at this critical juncture. One more bit of the original subtropical wilderness represents an asset for both present and future generations. With the right approach, the Wekiva Parkway can provide an enlightened model of low-density development that respects the value of open space.

In town, Sunrail presents denser development as an alternative. The normal pathway, however, seems to pit the profit-seeking real estate developer against ever higher regulatory burdens, which eventually make his product unaffordable to those coming here to escape high costs and regulations in other cities. Keeping both employment and housing affordable are critical to achieving success with any of these projects.

Moving product down the value chaindoes not do well current system, which leaves out the very people who Sunrail supposedly will benefit. Density is one of those characteristics that seems to be about good timing: if you have it today, like San Francisco or New York, this is largely the result of history; if you do not have it today, like Orlando, it is risky and probably a dubious proposition.

The road and the train open up land that must be carefully stewarded to create opportunities for meaningful employment and affordable housing, both of which are presently scarce commodities. The concept of transit-oriented development needs a success story, and Sunrail provides 17 opportunities to find one; meanwhile, the road presents a danger as well as an opportunity for Florida’s wetlands. As the region slowly recovers from the recession, the two projects together should be carefully considered by the region’s citizens and leadership to truly redefine Central Florida’s identity for the 21st century.

Photo courtesy of BigStockPhoto.com.

Florida Repeals Smart Growth Law

Wendell Cox — Fri, 07 Oct 2011 01:38:50 -0400

The state of Florida has repealed its 30-year old growth management law (also called "smart growth," "compact development" and "livability"). Under the law, local jurisdictions were required to adopt comprehensive land use plans stipulating where development could and could not occur. These plans were subject to approval by the state Department of Community Affairs, an agency now abolished by the legislation. The state approval process had been similar to that of Oregon. Governor Rick Scott had urged repeal as a part of his program to create 700,000 new jobs in seven years in Florida. Economic research in the Netherlands, the United Kingdom and the United States has associated slower economic growth with growth management programs.

Local governments will still be permitted to implement growth management programs, but largely without state mandates. Some local jurisdictions will continue their growth management programs, while others will welcome development.

The Need for A Competitive Land Supply: Growth management has been cited extensively in economic research because of its association with higher housing costs. The basic problem is that, by delineating and limiting the land that can the used for development, planners create guides to investment, which shows developers where they must buy and tells the now more scarce sellers that the buyers have little choice but to negotiate with them. This can violate the "principle of competitive land supply," cited by Brookings Institution economist Anthony Downs. Downs said:

If a locality limits to certain sites the land that can be developed within a given period, it confers a preferred market position on those sites. ... If the limitation is stringent enough, it may also confirm a monopolistic powers on the owners of those sites, permitting them to raising land prices substantially.

This necessity of retaining a competitive land supply is conceded by proponents of growth management. The Brookings Institution published research by leading advocates of growth management, Arthur C Nelson, Rolf Pendall, Casey J. Dawkins and Gerrit J. Knapp that makes the connection, despite often incorrect citations by advocates to the contrary. In particular they cite higher house prices in California as having resulted from growth management restrictions that were too strong.

...even well-intentioned growth management programs ... can accommodate too little growth and result in higher housing prices. This is arguably what happened in parts of California where growth boundaries were drawn so tightly without accommodating other housing needs

Nelson, et al. also concluded that “... the housing price effects of growth management policies depend heavily on how they are designed and implemented. If the policies tend to restrict land supplies, then housing price increases are expected” (emphasis in original).

In other words, if growth management policies do not maintain a competitive land supply, house prices are likely to rise in response. This is basic economics. Restricting the supply of any good or service in demand is likely to lead to higher prices, all things being equal.

The loss of a competitive land supply was seen during the real estate bubble in the unprecedented escalation of house prices in California (which was already high), Oregon, Washington, Phoenix, Las Vegas, parts of the Northeast and Florida. In these markets, the demand from more liberal lending standards was much greater than the land available for development under growth management plans and government land auctions. By contrast, house prices generally stayed within historic norms in metropolitan areas where land supplies were not constrained by growth management programs, such as Dallas-Fort Worth, Houston, Atlanta, Austin, Indianapolis, Kansas City and elsewhere.

Housing Price Escalation in Florida: In 2000, the four Florida metropolitan areas with more than 1,000,000 population had Median Multiples (median house price divided by median household income) near or below the historic norm of 3.0. By late in the next decade, all four metropolitan areas reached unprecedented levels of unaffordability. In Miami, the Median Multiple reached 7.2. In Orlando, the Median Multiple peaked at 5.2, 70 percent above the historic norm. In Tampa-St. Petersburg, the Median Multiple peaked at 4.8, 60 percent above the historic norm. The peak in Jacksonville was a more modest 3.6, though this was still an 80 percent increase.

By 2010, the Median Multiple has declined to hear the historic norm in Orlando and Tampa-St. Petersburg and slightly below in Jacksonville. The Median Multiple remained well above the historic norm in Miami, at 4.7.

When Supply Lags Behind Demand: Florida's housing cost escalation may have been surprising, since Florida has a reputation for liberal land-use regulation. However, the growth management act had long since turned the state toward a shortage of land supply relative to demand as described by Wachovia Bank in a 2005 analysis.

"While all the stars seem to be perfectly aligned on the demand side, the supply of housing in Florida has been much more problematic. Even though residential construction has soared to new highs recently, the supply of housing has lagged woefully behind demand in recent years. This has been particularly true for single-family homes, where population growth, a rising homeownership rate, and strong demand for second homes and vacation properties created a demand for 560,000 new single-family homes between mid 2000 and mid 2004. During this period builders only delivered 540,000 units. When you add in the growing demand for townhouses and condominiums, buyers were looking to purchase 675,000 new homes during this period, while builders were supplied just 570,000 units. No wonder prices have been surging!

The chief impediment to new construction has been a shortage of developable land. The shortage primarily results from a growing resistance to new development. The state is not running out of space. Nearly every community in Florida and the state itself are looking at some type of limitations on new residential development. While well intentioned, these initiatives are making it more time consuming and expensive to build homes in Florida. Others are taking land off the market, designating areas for green space, or preserving space for industrial development. The net result has been dramatically higher land prices across much of the state."

The point of the Wachovia analysis is that unless there is a sufficient supply of land, the price of housing is likely to rise. Having a lot of land is not enough. There must be enough land to accommodate demand at affordable land and housing prices (Note).

The Florida action is the most successful reversal of house price increasing growth management regulations to date.

Other Advances: There have, however, then more modest advances.

After taking office in 2003, Minnesota Governor Tim Pawlenty replaced the board of directors of the Metropolitan Council in Minneapolis-Saint Paul. The previous board had been spent on the following Portland style growth management policies, including the enforcement of a variant of the urban growth boundary. The new board exhibited more liberal attitudes toward residential development, and the housing bubble did not produce the extent of housing affordability in the Twin Cities that occurred in growth management areas such as Portland, California and Florida.

The Conservative- Liberal coalition government of the United Kingdom has proposed modest relaxation of some of the world's most restrictive land use regulations, which could lead to an improvement of housing affordability in the nation. Kate Barker, who was then a member of the Monetary Policy Committee of the Bank of England was commissioned to examine land-use regulation and housing affordability in England and found a strong association between the loss of housing affordability and restrictive land use policies. This association between Britain's strong land use regulation and higher house prices was noted in the early 1970s research led by Sir Peter Hall of the University College, London.

For the Future: The relaxation of overly restrictive growth management policies could not have come at a better time. With the squeeze on the middle-class getting tighter, fewer households can afford higher housing costs associated with growth management areas. Moreover, responsive to the political consensus for job creation, more home construction will bring return more good-paying construction jobs in Florida.

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

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Note: There has been a similar misunderstanding of the housing markets in Las Vegas and Phoenix, where developable land appears to stretch virtually to the horizon. However, what is usually missed is that both metropolitan areas are hemmed in by government land, some of which is periodically auctioned. During the housing bubble, the price per acre of residential land at auction in both metropolitan areas rose as much as the price for land rose over a similar period in Beijing, with its huge land price increases.

Photo: Orlando (by author)

Can Florida Escape the Horse Latitudes?

Richard Reep — Mon, 27 Jun 2011 21:38:56 -0400

When it comes to the winds of change, Florida remains in the horse latitudes. This zone of the Atlantic around 30 degrees latitude was so named by ship captains because their ships, becalmed in the water, seemed to move faster when they lightened their load by throwing off a few horses. Florida’s governor Rick Scott, who campaigned on a promise to create 700,000 jobs in this state, appears to have adopted the same tactic by throwing overboard the Department of Community Affairs, the state agency that regulated real estate development. Other bureaucracies may be next in line if the state doesn’t show signs of improvement soon.

Billy Buzzett, appointed head of this bureaucracy, was in Orlando last week to discuss the new future of Florida growth management. Growth will now be lightly monitored by the Department of Economic Opportunity , which is in charge of reviewing development plans, and will handle unemployment benefits as well. Mr. Buzzett stated that the department’s mission will also include items such as weatherization of structures for hurricanes. All of this is good, but it’s a puzzling mix to throw into a single bureaucracy. Obviously, real estate regulation is not the focus of this governor, who saw regulation as one of the chief obstacles to creating jobs in this state.

The Department of Community Affairs was created in 1985 to set some standards for quality of life as well as for environmental protection. Failing at both tasks, the DCA came under fire during the last election cycle as a statewide referendum (Amendment 4) on growth gained support from people tired of seeing forests converted into strip malls. The referendum, narrowly defeated, would have people vote in Cailfornia-style ballots for such changes. This may have been a bad idea, based on how California’s growth controls have stifled its once vibrant economy.

In this era of minimal new building, the reinvention of growth management may be seen as a way to pass the time while we wait for the economy to recover. In reality, however, there are some very large implications in the future.

Governor Scott wants the state to be more like Texas, which regulates with a far lighter hand and seems to be navigating through this particularly horrid recession better than other big states. Texas has growth and does not have an onerous, time-consuming process which weeds out all but the deepest pocketed investors. Unlike Texas, however, Florida has few natural resources like oil and mineral wealth to fall back on for revenue, and therefore deregulates itself without any diversification of income stream.

What this means to the local economy will be hard to predict. Certainly, the DCA was able to negotiate with private developers, and helped to shield cities and counties from a lot of the pressure from out-of-state interests. Without the DCA, it will be interesting to watch which of Florida's regions stand up to this pressure and which regions, starved for cash, cave in to the pressures of growth.

Although defeated, Amendment 4 clearly scared the real estate interests to death. Legislation now prevents anything like that from happening again. While real estate development clearly needs to be left in the hands of professionals, it also seems to have risen to the top of citizens’ awareness. Whether it stays there or not is up to the state’s citizens, most of whom immigrated from elsewhere in search of the good life. Growth benefitted the lowest economic class by creating cheap housing, construction jobs and access to consumer goods. Florida, however, by grabbing the bottom tranche of workers, has missed a chance to build a more vertically integrated middle class with higher skilled workers.

Orlando in particular is in an unfortunate situation, as it has no natural hard boundaries like the sea. Like Atlanta, Central Florida’s metropolitan area can grow in concentric rings forever and ever, gobbling up more agriculture, wetlands, and forests. Such a development pattern puts value on the rim, rather than in the center, leaving the older parts of the city devoid of investment, energy, and hope. With private interests, whose mission is to grab the low hanging fruit, in chargethere will be little redevelopment of these interior districts, despite the sunk costs of infrastructure that could give them an edge.

Making more stuff is the business of growth. Making stuff better is the business of development. And development is what older neighborhood areas like this sorely need. Successful in-fill redevelopment, in both suburban and urban locations, can still happen if employment can be added to the mix.

It is up to our region's leadership to turn this pattern around, and start valuing our real estate a little differently than in the past. For example, debasing our wetlands to their mere economic value overlooks their larger value in terms of biodiversity. Bringing wetlands and agriculture into our growth management policy would be a good first step towards creating a sustainable future for Central Florida. Florida’s environmental movement need not turn into a shrill anti-growth machine as has happened elsewhere, but should be a partner with the real estate interests to protect the more long-term natural assets that bring so many to the Sunshine State in the first place.

Recycling also need not be just the job of the utility department. Recycling land through the EPA’s brownfield program is already underway by many municipalities, and provides a vehicle to reinvent neighborhoods that have failed.

As always, clean water will be the limiting factor to growth. Already a concern of Florida, the state is divided into various water management districts, who regulate how clean water can be removed from the aquifer, and what kind of dirty water can be put into it. No doubt this regulation will be under assault next.

Without Secretary Buzzett’s new department, Florida is already showing signs of new employment opportunities and diversity. Military spending in Florida is up, thanks to the National Center for Simulation, and medical research spending is continuing at a steady pace. These were added to the mix of growth, tourism, and agriculture upon which Florida has traditionally relied. More jobs that revolve around these two industries will include support technology, computer science, manufacturing, and services.

These industries grew despite the regulatory burden of the state. What is dangerous about Secretary Buzzett’s new department is its blasé treatment of the public’s genuine desire for better environmental management and a better quality of life. Like many places, Florida has its share of “not in my backyard” sentiment reacting against more development. The anger voiced in 2010 through Amendment 4, however, represented something new and deeper: a collective sense that enough is enough. Speculative development, built during the boom and remaining unoccupied to this day, is in every community, urban and rural. Few believe that the empty condos, ghost town subdivisions, empty strip shopping centers, and vacant office parks are improvements over what was there before, and fewer still want this kind of insanity to return.

So the death of the DCA, which allowed speculative development to the point of embarrassment, may have been a good thing. Employment-based growth, which so far has eluded Florida’s regions, may now have a chance to take place. With the new industries arriving, job creation is already a reality - no horses had to be thrown overboard to make that happen. What Florida needs now is some leadership at the local level to promote more employment-based growth that is slow, but sure, and that is sustainable for the long haul.

Photo: Desiree N. Williams

Orlando’s Sunrail: Blank Checks Induced by Washington

Wendell Cox — Mon, 06 Jun 2011 22:46:35 -0400

We are supposedly living in an age of austerity, but many federal programs are leading many states into overspending and potential fiscal insolvency. Transit spending is a case in point, as is indicated by the proposed Orlando Sunrail commuter rail project.

How Washington Induces Higher State and Local Spending: For decades, the federal government has encouraged state and local governments to build expensive projects, as is the case in Orlando. Under the Federal Transit Administration (FTA) "New Starts" program, state and local governments can obtain federal funding for such projects, contingent on their taxpayers providing "matching funding." This can be in the form of higher taxes, budget increases or in unplanned subsequent expenditures that are higher than projected. The responsibility for cost overruns and operating subsidies belong exclusively to state or local taxpayers.

Inaccurate Cost Forecasts: This can prove very expensive. European researchers Bent Flyvbjerg, Nils Bruzelius and Werner Rottengather (Megaprojects and Risk: An Anatomy of Ambition) and others have shown that new rail projects routinely cost more than planned (Note 1).

Flyvbjerg et al found that the average rail project cost 45 more than projected and that 80 percent cost overruns were not unusual. Cost overruns were found to occur in 9 of 10 projects. Moreover, they found that despite increased attention to these cost blow-outs, final costs continue to be far above the projections presented to public officials and the taxpayers at approval time. Further, they found that ridership and passenger fares also often fell short of projections, increasing the need for operating subsidies.

Moreover, urban rail systems are of questionable value. Transport economist Clifford Winston of the Brookings Institution has noted that "the cost of building rail systems are notorious for exceeding expectations, while ridership levels tend to be much lower than anticipated" and that "continuing capital investments are swelling the deficit."

Federal policies, however, often force state and local taxpayers to guarantee the accuracy of notoriously inaccurate cost projections. The standard FTA "full funding agreement," a prerequisite for federal funding, requires state or local taxpayers to pay for any cost overruns. Further, if the projects are not completed, state and local taxpayers are required to pay back the federal grants (more on Florida's experience with that later).

Sunrail: The "Sunrail" commuter rail project is planned to parallel Interstate 4 in the Orlando metropolitan area. From the perspective of Florida taxpayers, the tragedy is that the project has proceeded so far. Project forecasts say that in 2030, Sunrail will add only 1,850 new round trip riders daily to Orlando's already sparse transit ridership (barely half a percent of travel). Even if all Sunrail trips were for employment, it would not even be a "drop in the bucket" in a metropolitan area likely to add more than 400,000 jobs by 2030. Further, despite inferences to the contrary, this will have less than negligible impact on traffic congestion. It is likely that traffic on Interstate 4 will increase by at least 100,000 cars daily by 2030 (Note 3), many times the cars that Sunrail could possibly remove, even under its probably exaggerated ridership projections.

Sunrail also will do little to increase job access to jobs in a metropolitan area where less than two percent of employment can be reached by the average commuter in 45 minutes using transit, according to Brookings Institution research. By contrast, at least more than 80 percent of jobs in the Orlando metropolitan area are reached in 45 minutes by car, and more than 55 percent in 30 minutes. Despite the high costs of all this and Sunrail's negligible effect on regional mobility, politics may preclude cancellation of the project.

Sunrail's first phase is projected to cost $350 million (after a half-billion dollar right-of-way purchase). The Federal Transit Administration intends to pay a maximum of $175 million for the project. State taxpayers (through the Florida Department of Transportation) will be required to match that funding with another $175 million, though that amount could grow.

Florida Taxpayers Already Burnt Once: In addition in paying for likely Sunrail cost overruns, Florida taxpayers would be obligated to fund service levels that satisfy the Federal Transit Administration. Otherwise the federal government can demand that taxpayers send the money back. This is no idle threat. When the Miami commuter rail system (Tri-Rail) provided service levels deemed insufficient, FTA demanded a return of $250 million in federal grants. This repayment was averted only by a state bailout that provided up to $15 million in annual subsidies to increase the service levels (Note 2).

Essentially then, to obtain federal funding for Sunrail, Florida taxpayers must write a blank check out to a rail construction industry that has repeatedly demonstrated an inability to build rail projects for promised amounts.

Negotiating a Way Out? Florida taxpayers, however, may have some options to avoid writing the blank check. In March, the US Department of Transportation (USDOT) desperately sought to find governments in Florida willing to provide a blank check to fund the now cancelled Tampa to Orlando high-speed rail line, with costs that were so low that they had "big cost overruns" written all over them.

In a February 27 letter USDOT told local officials the federal grant repayment provisions were negotiable. Based upon this policy latitude available to USDOT, Florida officials could seek less unreasonable terms with USDOT. For example, a revision might be negotiated to limit Florida's cost overrun liability to amounts resulting from state actions. Further, Florida should seek agreement that it does not have to operate service levels that are greater than required by demand or can be afforded. This would prevent a repeat of the unhappy Tri-Rail experience.

Provisions such as these would provide important protections to Florida taxpayers, who could otherwise be forced to pay hundreds of millions in cost overruns and higher operating subsidies and potentially higher taxes.

Lessons for Taxpayers: Projects like Orlando's Sunrail provide important lessons for the nation. The stimulus, now winding down, boosted questionable spending policies well outside the Beltway. Washington needs to stop writing blank checks on taxpayer accounts. It’s time for the feds to stop inducing state and local governments to mimic its fiscal irresponsibility.

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Notes

1. Flyvbjerg is a professor at Oxford University in the United Kingdom. Bruzelius is an associate professor at the University of Stockholm. Rothengatter is head of the Institute of Economic Policy and Research at the University of Karlsruhe in Germany and has served as president of the World Conference on Transport Research Society (WCTRS), which is perhaps the largest and most prestigious international association of transport academics and professionals.

2. The Florida Department of Transportation has made agreements local governments to participate in funding of Sunrail cost overruns. However, in the event that local governments are unable to pay their share, it may be expected that the state will pay, as it did in bailing out Miami's Tri-Rail (discussed above).

3. Assumes that automobile traffic would grow at the projected population growth rate (based upon University of Florida population projections).

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Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

Photo: Downtown Orlando (by author)

Orlando: Uncle Sam Meets Mickey Mouse

Richard Reep — Thu, 02 Jun 2011 16:32:45 -0400

Hawks and doves disagree on whether World War II ended the Great Depression. Depending on which species of bird squawks louder, military spending may be the only way out of our current financial malaise. In many ways it is already happening, although it is a surreptitious and quiet influence felt mostly in the high-tech economic sector. Defense growth in one of the most unlikely places – Orlando, Florida – has already begun to diversify the region’s income stream, create a new urban corner of Central Florida, and tap into some of the natural allies and partners that already exist here. Mickey Mouse is now sharing Orlando with Uncle Sam as the militarization of the local economy increases.

America’s current rough patch, as Dr. Roger Siebert recently wrote about , seems to be deeper than any in recent memory, and recalls the 1930s. During that time, isolationism was only cured by a slap in the face: Pearl Harbor. Today’s isolationism, so vigorously voiced in the calls to depart Afghanistan, seems to echo that period. Enlistment in the military isn’t exactly vigorous, and intervention in troubled regions is not on the radar screen of even the most ardent hawk. America seems too self-involved at the moment to care.

Yet at this very same time, Pentagon spending is quietly rising in the modeling, simulation, and training fields. Already employing 53,000 Floridians, 9,000 more than the state’s hallowed agriculture industry, this growth sector is hugely dependent upon a high-skilled, high-wage workforce. The ability to train soldiers, sailors, and pilots without the expense of actual bombs and equipment has clearly demonstrated its benefits to the satisfaction of the military brass, making it inevitable that more is to come.

Co-located next to Florida’s premier high-tech medical research park, Lake Nona, the National Simulation Center is the most common name used to describe the efforts underway at the Central Florida Research Park on the east side of town. More importantly, however, the Center is adjacent to the University of Central Florida. Already the second largest university in the country, UCF is home to much of this Center’s local 18,000 workforce. With Navy, Air Force, and Marines research and training, the Simulation Center has quietly become the world’s largest military simulator .

Regionally, it leverages its old Naval Training Center roots and proximity to NASA facilities at Cape Canaveral to capture workers, skill sets, and continuous research and improvement. While the town struggles with slumping tourism and anemic population growth, the high-tech military industry is rapidly taking over as one of the biggest new economies to hit Florida.

Spinoffs from military research can only benefit Central Florida’s attractions and rides, as future tourists will be able to experience more and more virtual thrills in addition to more traditional meatspace rides and shows. In the meantime, it remains a quiet partner in diversifying the economy.

In the 1990s, the Naval Training Center left Orlando, ostensibly because it duplicated facilities that the Navy had elsewhere. Its developable land, close to downtown Orlando, became Baldwin Park, and the old barracks, classrooms, and laboratories were quickly bulldozed for lucrative residential real estate. Few were aware that the functions of the Orlando Naval Training Center were downsized, not eliminated, and were quietly relocated to the east side of town.

The Training Center evolved into the National Simulation Center. As a research-intensive industry, it capitalized on its new proximity to the University of Central Florida’s campus, and began an interchange with the engineering and computer science programs at that school. UCF, today with over 50,000 students, has quickly grown to become the nation’s second largest university, just behind Ohio State. UCF’s own Research Park has grown to rival the fabled Research Triangle in North Carolina, due to the synergy between military and higher education.

Its new location also moved the Training Center a little bit closer to the Kennedy Space Center as well. The Navy has always had a presence at Cape Canaveral, and with the employee base around the Space Center available less than an hour’s commute away, the Training Center has already benefitted from the availability of this highly skilled workforce who has suffered from the ebb and flow of NASA’s political fortunes.

Medical research being conducted by Scripps, Burnham, and Nemours will also benefit from this activity, as they are all building new facilities at Lake Nona. This medical research campus will employ many with the same skills, education, and training as the Simulation Center, and provide choices for the scientists and engineers living in Lake Nona’s suburbs. This makes the residential real estate around Lake Nona a bright spot in Central Florida’s otherwise horrendous housing market .

Surrounding the Simulation Center, small companies have already started feeding creativity and innovation into the giant maw of the military, and spinoffs – commercialization of its technology – have also benefitted larger companies such as Orlando’s game design team at Electronic Arts and the military contractor Lockheed Martin. This supply chain, once established in Orlando, gives localized sustainability to this industry and suggests that it has achieved a foothold among the tourism, agriculture, and growth industries firmly established in Central Florida.

Geographically, East Orlando is difficult to develop. Like the surface of swiss cheese, land above the flood plain, traditionally agricultural, is interlaced with wetlands and lakes, and it has been historically ignored for the broad swaths of low-hanging fruit closer to the theme parks and population centers on the west side of town. Pressure to develop, however, has suddenly put this area in the spotlight, and controversial proposals by homebuilders and other owners have raised questions about whether Florida should stay on its historic pathway of man vs. nature. Infrastructure – roads, utilities, and other unglamorous investment – still doesn’t exist in much of East Orlando. Because development has historically been in small pockets fragmented by the area’s mosaic of wetlands, connectivity and sheer mass will be difficult to achieve without great cost to the environment.

Yet this does not have to be so. Dense development can happen with respect to nature, as proven by countries such as Germany and Sweden . If left to the same old forces that developed the rest of Florida, it is unlikely that East Orlando will experience any innovation regarding development strategy, and Central Florida will host the same old battles of environmentalists vs. developers again and again. The state’s growth strategy – leaving it up to private interests – may have already guaranteed this outcome.

If, however, innovation transcends the research mission and influences the style of development to support this research, then the military and medical centers in East Orlando have a chance to provide a true, new pathway to the future. Like Victor Gruen’s 1963 concept for Valencia, which recognized such modern aspects of society such as the car, East Orlando could be planned as an employment-based community within the context of nature using contemporary science and technology. Orlando, the ephemeral city home to amusement parks and orange groves, could become a model for development to influence other areas struggling with the same questions.

Militarization of the economy may become a vehicle for true change. The cluster of military agencies and private businesses, headed by Lockheed Martin, all revolve around this economy and provide a badly-needed shot in the arm of Orlando’s workforce. With high-salary, highly educated workers, global connectivity, and a growth engine no less than the Department of Defense, Orlando can be assured of some good times ahead while the tourism and housing sectors recover. The region’s leadership must think carefully how to embrace this new savior, and what the greater implications are for the future.

Photo by Research Development Engineering Command

Condo Culture: How Florida Became Floridastan

Richard Reep — Sun, 22 May 2011 23:37:43 -0400

Welcome to Griftopia. The Florida housing industry needs a karmic rebalancing. Our recent roar of building new structures is echoed today by the squeaks and pops of a different type of construction industry. Invasive testing – the architectural equivalent of a biopsy – seems to be on the rise. Saws, hammers, and cranes can be heard through the quiet suburban developments and subdivisions around Florida, as shingles and stucco are cut off in small patches to reveal serious problems within.

Like the hidden defects in mortgage-backed securities and other arcane instruments of finance, these flaws are covered up and papered over, but are no less damaging. They are also just as revealing about our collective haste to accommodate growth.

Few other places saw as much suburban expansion as Florida did, beginning in the 1990s and lasting right up until the bursting of the 2008 real estate bubble. Old hands in the Florida real estate development game see the cycle as never-ending, stretching all the way back to Ponce de Leon, whose “fountain of youth” was perhaps the state’s first marketing gimmick. The most recent bust, however, provides important lessons, should future cycles include speculators and regulators alike feeding at the trough. Rapid growth breeds errors, compromises, and sloppiness which have dire, lasting consequences.

Pundits are assigning blame for the Millennial Depression up and down the economic ladder, and certainly the Florida housing boom and bust provides many examples of all that went wrong. The largest developers, driven by stockholders and Wall Street to seek rapid growth and high profits, gambled that Florida’s population boom would last forever. With the good addresses already taken, “B” properties close to interstates, under flight paths and adjacent to sensitive wetlands began to see activity. Low density reduced the developers' risks and reduced construction costs, as well.

The Florida condominium – outwardly appearing as an apartment complex — was a home ownership product for the masses. As long as the product lasted 30 years (or however long it took to pay off the mortgage), no one much cared about its quality and stability as an asset. Anonymous, stick-built stucco boxes, baking in the Florida sun, seemed the perfect solution to meet the demands of stockholders and investors, and the regulatory pathway was smoothed over to keep the production line rolling.

Immigrants from abroad and from other parts of the country bought their own piece of the American Dream: gated entries, warrens of tight garages, patches of St. Augustine grass, buggy-whip sized oak trees and tightly wrapped stucco and glass boxes. Balconies are common, although the tiny decks and the heat preclude much enjoyment of the outdoors. Designed to prevent neighbors from meeting or children to freely play, these contemporary cracker box condos sullenly sweat in the heat. Still, they gave a much-needed step-up for the vast service workforce looking for a way out of the rental market and into an ownership position, and buyers can perhaps be forgiven for overlooking the cheapness of construction in favor of a new way to prosperity and success.

The demand, however, outstripped the ability to deliver. Design and construction delays simply due to over-commitment and lack of manpower meant that corners were cut, compromises were made, and slop was tolerated. It was as if the investment mania on Wall Street – in journalist Matt Taibbi’s words, “griftopia” – had trickled down to the field superintendents, masons, and framing crews. A collective haste gripped much of the state’s growth industry, haste that is cause for regret today.

A ten-year-old stucco building may look to be in perfectly good shape from the outside. When entering the bland, beige entry hall, however, the tang of mold immediately invades one’s nose. Once water has been trapped in a building it breeds a most sinister fungus.

Condominium units that suffer this malady are ascending the legal chain one by one across the girth of the state. First, individual owners collect themselves and confront their homeowner’s association. HOAs bombarded with complaints succumb quickly to “condo chaser” attorneys who promise to split the goodly sums they can rake off the insurance companies that covered the contractors and design professionals involved in the mess. And then, discovery begins.

It takes about a week to vivisect a low-rise building. Ordinarily, the stucco walls are saw-cut down to the bone, and the plaster comes off in a solid sheet, revealing metal strap ties and sheathing tissue within. The sheathing panels themselves are made of glued together wood chips – so-called “oriented strandboard” – only as strong as the glue itself. Removal of the sheathing layer reveals the deep ligaments and structural bones of the building.

Buildings designed in Texas, Ohio, Georgia, and elsewhere populate the Florida landscape. These buildings have almost no roof eave at all, as if the fierce Florida sun didn’t matter. The skin-tight stucco may not be Portland cement plaster, because dryvit (an acrylic latex substitute for stucco invented after World War II to quickly rebuild Europe) has become a popular substitute. The windows are set at the outside of the wall, with no shading at all on the glass. The effect is that the building looks as stretched tight as a balloon.

Unfortunately, such a combination frequently admits water into tiny cracks and crevices, and the water has no way to seep out. Revealing the interior guts of a building is the only way to uncork mold and rust horrors that are otherwise invisible. Insidious ants wind their way into the dark spaces between walls and floors where water and food are available.

Biopsies on sick buildings reflect our collective errors of judgment, and the healing process will be lengthy and expensive. Designs that do not reflect the harsh realities of Florida’s hot, wet climate are certainly responsible for some of the errors. Designs that did not acknowledge the scarcity of experienced construction crews were also responsible, because construction takes teamwork and skill. And contractors, encouraged to cut costs in order to boost their own bottom lines, cut time or cut labor to get the job done faster.

Designers and contractors may also legitimately point the finger back at clients who pushed hard. A collective irrationality set in towards the end of the last decade. More work had to be done by fewer people, less experience was available to go around, and in the heat of the moment steps could be skipped in the name of innovation. The consequences are being felt only now.

A huge, sad pile of lost resources, our vanishing wood and raw materials, must be hauled off to clean these errors out of the system. Sadder to see are the homeowners, as they pack up and move out of their mold-infested units. But saddest of all is the apparent inability of the industry to learn from its own mistakes.

Let’s hope that this time around it can happen differently. Reject growth for growth’s sake. Florida, hooked on this drug for too long, deluded itself into filling up wetlands and paving more and more space.

Instead, as the tide rolls in once again, Florida can make a pact with itself to invest in development, rather than growth. Redeveloping older, inner cores of cities where services and employment are already in place can go a longer way towards making the state a sustainable, diverse place to live than paving one more tract of raw land mowed down for home lots can.

Revamp the state’s development culture. Private developers have written Florida’s growth management code, and gradually increased the requirements so that only the largest and most deep-pocketed developers can compete. Protecting neither the environment nor quality of life very well, the development regulations are in dire need of rewriting, with a different set of requirements that favor smaller-scale development and redevelopment, and encourage affordability.

In the meantime, discovery continues. More leaky roofs, more fungus-infested units, and more attics seething with ants, testimony to our collective haste and greed. As the nation slowly recovers economically, Florida has paused for breath on the pathway to healthy construction. Before the next boom, its development industry would be wise to use this break in the action to consider the alternatives.

Photo by the author.

Can Common Sense, and maybe Mickey, Save Orlando’s Transit Mess?

Richard Reep — Tue, 01 Mar 2011 04:38:06 -0500

The week’s debate about high-speed rail has once again polarized our populace, inflamed irrationality, and sent everyone back to their familiar corners. Little constructive debate is possible when major newspapers are flailing the governor for rejecting money and the seemingly global revolutionary fervor is gripping local citizens who rallied in protest Wednesday night around downtown Orlando’s Lake Eola. None of this will do any good for the service workers trying to get to their jobs in the theme parks or for downtown cube dwellers streaming to scattered office parks. With or without light rail the city inches closer and closer to the traffic hell of Atlanta, or worse even, DC. After all, both cities already have large rail transit systems.

What will do some good is a creative discussion of some real change that can occur to improve our commute.

We must recognize that we are stuck with our cars. They aren’t going away. We can’t wish them away. We have to make them better fast, because with changes blowin’ in the wind and with oil jumping back up over $100 a barrel.

The high-speed bullet train – a sort of latter-day interstate highway program – sounded like a great idea at first, a welcome alternative to the ardor of air travel and the gas-sucking monotony of driving. It has shortcomings, however, it will likely prove obscenely expensive, and once one gets to the destination, one is typically relegated to more driving.

Nor is this some form of effective industrial policy. The things will be built overseas – Germany, Japan or most likely China – a great jobs program for someone else. And tourists, who vastly prefer the freedom of car rental and driving, aren’t likely to use it except as a novelty for one of their visits to our wonderful place. Perhaps the bitterest part of the bullet train pill: it will indebt our children and grandchildren to pay off landowners giving up their land in eminent domain – which produces nothing – and the cost of complex machines made overseas. The bullet train ends up being a clumsy solution imposed from above, rather than a grassroots solution to our real problems.

Any frequent driver on Interstate 4 between Orlando and Tampa can tell you there are four basic kinds of traffic: tourists in buses or cars; freight, in the form of tractor-trailers: business travelers (who need the flexibility of a car on the other end): and personal travelers. Instead of targeting an expensive solution at just the smallest form of traffic, personal travel, a 4-part solution is suggested, all of which would add up to far less than $2 billion that minimally the high-speed line would have cost.

Trains can be good – for freight. There are already freight lines running between Tampa and Orlando. Getting the freight off of tractor-trailers and onto these freight lines, where it is vastly cheaper to move goods, should be a no-brainer for the state. Use some of the DOT money to modernize freight depots along the pathway, incentivize freight customers to move their goods onto trains, and this will vastly improve the situation.
Tourists can drive – at a price. Our state should be treat itself with higher regard and also encourage a culture of sustainability for those visiting us. Higher taxes on rental cars should be charged, and the taxes placed in an environmental fund to remove some of the unsightly development that has defaced our region, and return it to the special place it once was.
Give business travelers an alternative. If there were an affordable air shuttle between Tampa and Orlando, at the right price it would be full. Little Embraers (made in Melbourne, by the way) taking off from FBOs at Orlando Executive Airport, Sanford Airport, and Orlando International Airport and landing in Tampa airfields would be worth $100 a seat, if the time/cost tradeoff were analyzed. Ybor City for lunch, anyone?
Give personal drivers an alternative. For the cost of less than 50 miles of new road, a totally independent alternative to I-4 is waiting out there. The first link of this road would connect Tampa’s Crosstown Express to Lakeland’s Western Beltway. The next link of this road would connect the Western Beltway to the Greenway at Celebration. Drivers will be able to go from downtown Tampa to downtown Orlando without their wheels touching I-4 even once. Nice.

And now, for the big one. Right smack in the middle of the white-hot I-4 corridor lays a large, private entity, Disney, has been operating a private, train-based mass transit system for the last 40 years. High labor costs? Yes. Fossil fuel driven? Yes. This entity has been strangely silent over the entire debate.

If this entity were to wake up and seize the opportunity before it, one might see a true train that works. First of all, the monorail was planned with some sense: it connects dense areas together. If Disney were to offer to build, as a private development, extensions of its monorail reaching out to Tampa on one side and Orlando on the other, the air rights for this system could be along government-owned I-4 (no imminent domain costs). This entity is also highly encouraged to charge market rate and to make a profitable venture out of operating this system. And the taxpayers would not be stuck with the bill.

A vision for transit between Tampa and Orlando needs to be truly holistic, taking into account all types of traffic connecting the two regions. This vision also needs to be locally driven, taking advantage of local strengths and assets already in place. The high speed bullet train does none of this. Instead, a multi-faceted solution that provides flexibility at both ends, leverages our current strengths, and partners with the strongest player in the region has a chance of truly making a difference in the present tense and likely future budget climate This is what sustainability is truly about, and is what our future generations deserve.

Photo by Joe Penniston

Tampa to Orlando High-Speed Rail: Keeping Promises to Taxpayers?

Wendell Cox — Mon, 17 Jan 2011 00:38:22 -0500

Florida's Tampa to Orlando high-speed rail project could be barreling down the tracks toward taxpayer obligations many times the $280 million currently advertised. That is the conclusion of my Reason Foundation report, The Tampa to Orlando High-Speed Rail Project: Florida Taxpayer Risk Assessment.

The 84 mile, purportedly $2.7 billion project is administered by Florida Rail Enterprise (a part of the Florida Department of Transportation) and would be built by a private builder/operator selected through a competitive process. There are a number of reasons to believe that there is slim prospect of limiting the obligation of Florida taxpayer to the promised $280 million.

Capital Cost Overruns: The International Experience

The international experience indicates that Florida taxpayers will indeed be fortunate if the bill is only $280 million. A team led by Oxford University professor Bengt Flyvbjerg found that passenger rail systems typically have cost overruns of 45 percent. Such a cost overrun would increase the bill for Florida taxpayers to $1.5 billion.

Capital Cost Comparison to California

However, the capital cost overrun could be even greater. The Tampa to Orlando line cost per mile is less than half that of the first segment of the California high-speed rail line, despite factors that should make the Florida line more expensive..

In California, there is a concern that the eventual $45 billion or more required to complete the 500 mile route may not be obtained. As a result, the first segment (Borden to Corcoran in the agricultural San Joaquin Valley) is being built so that it can be used by the existing Amtrak service should the high-speed rail line not be fully completed.

Thus the shorter $4.2 billion California segment excludes various elements that will need to be upgraded later for high-speed rail trains to operate. The $4.2 billion does not include the funding for trains, electric power infrastructure, train yards, train maintenance facilities and administrative facilities. More of the construction will be in agricultural and rural areas than in Florida which will tend to make the California project less costly. There will be only two "Amtrak" quality stations, as opposed to the five far more expensive high-speed rail stations on the Tampa to Orlando line.

For example, Florida Rail Enterprise characterizes the potential Tampa station as having the "potential to be one of the most visible, dominant and iconic architectural features of the city." This hardly suggests a process driven by cost control.

The Tampa to Orlando line does have two cost advantages relative to the California line, including that right-of-way has largely already been obtained and that there will be less construction on viaducts. These factors however, seem unlikely to compensate for the elements that are excluded from the California costs.

The Tampa Orlando high-speed rail line would cost $3 billion more if its cost per mile equals that of the California segment. All of these additional costs would be the responsibility Florida taxpayers and would raise their bill to nearly $3.3 billion (Figure).

International Research: Subsidizing Operating Losses

There is reason to believe that the line will suffer day to day operating losses, despite claims of Florida Rail Enterprise to the contrary.

Just as the international research indicates costs are often understated, ridership and revenue is often overstated. Flyvbjerg's team found that projections were, on average, 65% higher than the eventual actual ridership. If the Tampa to Orlando line were to match this average, Florida taxpayers would have pay $300 million more just over the first 10 years of operation to make up for operating losses. This would raise the bill for Florida taxpayers to $3.6 billion ($3.3 billion plus $300 million) with more likely after 10 years.

The Tampa to Orlando Market: Operating Losses

The Tampa to Orlando high speed rail line may not achieve even the already discounted average ridership performance evident in the international research. This would mean an even greater revenue shortfall and more in bills for Florida taxpayers.

The Tampa to Orlando line will provide virtually no intercity travel time advantage compared to the car. It will, in fact, cost more than driving. It will cost a lot more in the likely event that an expensive taxi ride or a car rental at is required the destination. Even so, the ridership projections can be characterized as stratospheric. Florida Rail Enterprise assumes two thirds of the ridership of Amtrak's Acela Express on the Northeast Corridor, despite the fact that the Acela market has eight times the population of the Tampa to Orlando market.

Moreover, the Tampa to Orlando line will operate at average speeds 34 to 70 percent below that of high-speed rail trains in China, Japan and France. This is because the train will operate as a local shuttle between the Orlando International Airport, International Drive and Walt Disney World.

The Bottom Line

These risks combine to threaten Florida taxpayers with many times the claimed $280 million cost, like Massachusetts taxpayers, who were forced to pay much of the $16 billion in cost overruns on the "Big Dig" highway project. The risk to Florida taxpayers would be in contrast to the billions Governor Christie is saving New Jersey taxpayers by cancelling the "Access to the Regional Core" Hudson River tunnel for which costs were spiraling, consistent with the international research.

Choices

This would seem to be no time to saddle already overburdened taxpayers with additional and predictable obligations. Obviously, Florida taxpayers could be spared these risks by canceling the project.

However, the lure federal funding could prove to be irresistible. If so, the state should provide ironclad provisions to limit taxpayer subsidies to the promised $280 million. The builder/operator should assume all financial risks and there should be no state financial guarantees. Further, megaprojects like the Tampa to Orlando line can be "too big to fail," and it could be nearly impossible to stop construction once it is started, even as costs balloon. Thus, only the independently operable Orlando tourist shuttle segment (Orlando International Airport to International Drive and Walt Disney World) should be initially built. The extension to Tampa could be built later in the unlikely event that there is enough left of the $2.7 billion.

Keeping Promises

These decisions will soon be made by newly elected Governor Rick Scott, whose has stated that his evaluation will be driven by the impact on Florida taxpayers.

Doc Dockery, former chairman of the now-defunct Florida High Speed Rail Authority and financier of a now repealed constitutional amendment that required building high speed rail has "pooh-poohed" the risk of cost overruns, noting that the Florida Department of Transportation "has said repeatedly" that any bidder must "give a fixed price. This means no cost overruns." He continues, "how can this be more plainly stated?" Regrettably, the experience reveals the rhetoric to fall far short of what is required to protect taxpayers.

If construction proceeds, the Governor and state will be exposed to an over-whelming challenge to keep the $280 million promise to taxpayers. If they succeed, it will be a first. Chances are they won't.

Photo: Concept for "iconic" Tampa station. Available at floridahighspeedrail.org.

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

Health Care Development in Central Florida

Richard Reep — Thu, 29 Jul 2010 16:52:22 -0400

By Richard Reep

In this still cooling economy, Florida seems to be continually buffeted by a perfect storm of unemployment, record foreclosures, and stagnant population growth. As the state continues to suffer, the health care industry has unfolded two planning efforts aimed at building some economic momentum.

Florida Hospital’s Health Village, an urban revitalization of one of Orlando’s older core neighborhoods, is one planning effort to watch. The other, Lake Nona, is a classic suburban mixed-use campus planned around R&D facilities gilded with stellar names like Scripps and Nemours, occurring in the southeast periphery of Orlando. The vastly different values of their developers underscore the striking contrasts between the development strategies of Health Village and Lake Nona.

Lake Nona, a small lake just east of Orlando’s airport, is a new development centered around six major research facilities, four of which are under construction. Financing came from a 2006 program, the Florida Capital Formation Act, that has contributed millions to start up biomedical research in the state. Florida’s state venture capital fund lured Scripps, Nemours, Burnham, and M. D. Anderson. Two state universities are also participating, as well as the Veterans Administration with a new facility. This taxpayer investment was supplemented by Tavistock, the master developer of Isleworth fame, and smaller contributions by city, county, and other private investors all creating the impetus to develop this campus.

Lake Nona’s Robert Adams described his “model” as San Diego’s biomedical cluster, which combines commercial, clinical, research, and educational facilities forming. Employment, in the form of the research facilities, was preceded by a country club and an indistinct mix of Florida residential building types – estate homes, smaller single family homes, and multifamily clusters that are sprinkled amongst golf courses, pretty lakes, and remnant pockets of old Florida wilderness. It’s obvious upon visiting the campus that this is first and foremost a real estate development scheme. Like most developers, Tavistock programmed the uses and zones as if all the land, being flat, were relatively equal in nature except for the slightly more lucrative edges of lakes and the even more lucrative engineered waterways. Currently, the Town Center is an open, flat D-shaped parcel conveniently accessed from Orlando’s beltway, the 417. A comfortable, safe land development scheme with all the usual regulatory battles is underway, and eventually Orlando will find a new, attractive community themed around medical research competing with other new developments for market share.

In contrast, Florida Hospital selected, among its multiple sites in the state, about 96 acres squeezed between two close, parallel roads (Orange Avenue and Interstate 4) in a dense part of the city where the Adventist Health System quietly bought up dozens of individual parcels of 1930s era Orlando. Like most neighborhoods still suffering in the shadow of Eisenhower’s grand interstate system, this one has languished, and Florida Hospital intends to convert this neighborhood into a Health Village campus anchored by its adjacent hospital campus in a slow, organically grown and financed process.

Orange Avenue bisects this Health Village, with towering hospital facilities on one side and an aged, mostly 2-story commercial neighborhood on the other. Much of the older residential stock is past its useful life, and owners, grateful for a buyer to release them from the ragged edge of Interstate 4, quickly sold out and left. Inserting the Burnham Institute’s Clinical Research Institute for Diabetes will be the latest revitalization project, and the interior land is intended for residential development catering to hospital professionals and staff within walking distance.

With 17 hospital locations in Florida alone (the Adventist Health System operates medical facilities throughout the South and Midwest), the choice to locate a health village in a congested urban site is an interesting one. The city deal-making involved in such a move is reminiscent of the negotiations for New York’s Lincoln Center near Columbus Circle in the 1960s, and is rare in Florida where land is cheap. At first glance, it seems like Florida Hospital willingly hamstrung itself with this strategy, as compared to the huge blank slate being developed by Tavistock in Lake Nona.

Tavistock also has eyes firmly watching the global health care market, and hopes to compete with San Diego, Research Triangle, Dubai’s Medical City, Singapore’s Biopolis, and other stellar research clusters. Lake Nona’s growth potential is relatively large, assuming a smooth flow of funding and continuation of markets. The science-themed real estate development brochures for Lake Nona exude a breezy, hip confidence, putting biomedical research in the background and projecting an alluring lifestyle in the foreground.

Instead of amping up its marketing campaign to overcome its vastly smaller size, Florida Hospital’s Health Village eschews marketing altogether, as if it is too busy developing it to talk about it. The Adventist Health System is not visibly interested in the temporal nature of global markets, and its stated position as a Christian health care institution quietly suggests that reviving a struggling neighborhood – an exercise most developers would shy away from – is worth the effort. Florida Hospital’s ultimate end appears to be planned on a much longer timescale.

Both projects are refreshing pathways for Florida, as they represent an attempt to develop future jobs away from the dependence on tourism and second home development. Of the two, right now Lake
Nona seems much more poised for growth. With a vision for 16,000 jobs at maturity, Lake Nona hopes to capture a substantial portion of the real estate growth attached to those jobs, which is the tried-and-true Old Florida model. Shopping areas, recreational activities, and lifestyle creation will add one more new neighborhood cluster to a multipolar, decentralized region at the expense of 7,000 acres of Florida’s natural environment.

In contrast, Florida Hospital’s urban build out will benefit existing neighborhoods, certainly a new concept for Floridians. In this respect, Florida Hospital’s tiny contribution to growth (some 800 new residential units are proposed to replace the 150 existing homes) is more than offset by its larger contribution to Orlando’s development as a city. And it delivers this at no expense to Florida’s natural environment.

Each model offers something to a revived Florida. Florida Hospital’s campus in congested Orlando is instructive as a model for economic activity in the urban future. Religious institutions may become a more important force in the community, given the lack of wealth creation by the standard players in Wall Street and real estate speculation.

Tavistock could contribute as well, particularly as a move towards a new modality of wealth creation that transcends the traditional Florida focus on consumption activities: shopping malls, hotels, and theme parks. Placing the region on the world stage as a contender in health research can move Florida away from its failed model and towards a future shaped by important diversifications of its employment base.

Photo pf Lake Nona development by saikofish