(Unedited) Podcast Transcript 404: The Public Wealth of Cities
This week we’re joined by Diana Ramirez, Executive Director of the Harris County Department of Economic Equity and Opportunity, former Salt Lake County Mayor and Congressman Ben McAdams, Matt Prewitt, President of RadicalxChange and Joel Rogers, Director of COWS at the University of Wisconsin Madison to talk about how cities can understand the public wealth owned by our cities. We talk about how cities can create inventories of existing assets to generate public wealth and how economic value can be harnessed for public good.
Two articles referenced in this show:
How To Harness Cities’ Hidden Public Wealth – NOEMA Magazine
Harris County putting billions of assets to public use – Urban Edge
Putting Assets to Work – Government Finance Officers Association
Below is a full unedited transcript of the show:
Jeff Wood (2m 2s):
Well, Mayor Ben McAdams, Deanna Ramirez, Matt Pruitt, and Joel Rogers, Welcome to the Talking Headways podcast. Great
Group (2m 30s):
Great To be with you. Thank you. Yeah, good to be here, Jeff.
Jeff Wood (2m 32s):
Well, thanks everybody for being here. Before we get started, I’d like each one of you to tell us a little bit about yourselves. And first we’ll start with Diana and then we’ll go with Ben and then Matt, and then Joel.
Diana Ramirez (2m 40s):
Great. So I’m the Executive Director for the Department of Economic Equity and Opportunity here in Harris County, which is Houston, Texas. It’s a department that got started a little over a year ago, and it’s supposed to do lots of really interesting progressive work, including economic equity through our economic development reframing and then APA funding for workforce training program, small based technical assistance and our M WBE program, and then our putting Assets to Work Grant,
Ben McAdams (3m 15s):
I’m Ben Mc Adams. I was a member of the Utah State Senate, went on to be elected as Salt Lake County Mayor, representing the Salt Lake Metropolitan area. And then I was elected in 2018 to the United States Congress and now I am back in the private sector. When I lost my election in 2020, you know, I have such a, a passion for public service. I said to myself that I wanted to continue to be in a place where I could make a living and still make a difference. So I came back to this idea of putting assets to work, which is something that I was working on when I was mayor. I think has got such incredible potential to do good in our communities, partnering with people like Deanna Ramirez and helping them to succeed with an initiative that we’ll talk more about it.
Ben McAdams (3m 58s):
But I think there’s such incredible potential here and I’m excited to be working on this now in a private sector capacity.
Matt Prewitt (4m 4s):
My name is Matt Pruitt. I’m president of a nonprofit organization called Radical Exchange Foundation and we do a variety of sort of consulting and research and sort of community building focused on the idea of institutional innovation. So we take a really deep look at the basic institutions of markets and democracy and think about better ways of doing it, better ways of conceiving of property rights, better ways, organizing voting systems. And we often apply cutting edge ideas from mechanism design and and game theory to these problems of reimagining institutions.
Matt Prewitt (4m 44s):
So yeah, happy to be here.
Joel Rogers (4m 46s):
And I’m Joel Rogers. I teach at the University of Wisconsin Madison and I direct a center there called Cows. It’s been around for about 30 years and it has lots of little sub projects, including the Mayor’s Innovation Project and the State’s Smart Transportation Initiative within the mothership of cows. But cows is basically about promoting high road being equitable and inclusive and environmentally sustainable and democratically accountable solutions to a variety of problems. We’ve worked a little bit in housing, but mostly in energy, a lot of stuff in transportation infrastructure, a lot of stuff in human capital systems worker training and a variety of other things.
Joel Rogers (5m 34s):
So that’s one thing I do. And the other thing I do is I’m the chair of something called the Educational Partnership for Innovations in Communities Network, which is a ridiculously long name to produce the acronym Epic Epic Network. And that’s a collection or network of about 65 or 70 universities around the world, a lot in the us, some in Africa, some in Asia, some in Latin America, and the Caribbean that use the Epic model of university community engagement, which is a pretty simple model, which we can talk about we want, but mostly is an incredibly efficient, incredibly cheap and effective way of getting university knowledge out and about and used by communities that want it on terms that they welcome and don’t feel oppressed by.
Jeff Wood (6m 30s):
Awesome. Well, so I wanted to have you all come on the show to have a bit of a round table discussion on the topic of public wealth. And I must admit, I’m a bit nervous about this because it’s the first time we’ve done a show with four folks and it’s kind of a new topic outside of my personal knowledge. So go easy on me please. First, let me kind of explain why I pulled together this crew of folks. The reason I wanted to get into this topic today was because there are two articles that actually came out on the subject on the same day that I was doing my daily new search that I do for my newsletter. And Joel and Matt wrote a piece for Noah Magazine about public wealth and the Kinder Institute for Urban Research at Rice. Put out a piece about Harris County where Diana works, and as Diana mentioned, Harris County is where Houston is located and the county is inventorying assets as part of the putting Assets to work incubator, which is where Ben’s working.
Jeff Wood (7m 13s):
The most famous discussion about this is likely from Dag Detter and Stephan Holster’s book The Public Wealth of Cities. But it’s a topic that I think has generally been under the radar for a while. So first I wanna start with Ben. Where did you first find out about this idea of public asset inventory and why was the idea so compelling?
Ben McAdams (7m 28s):
So I was connected to this idea through Bruce Katz who introduced me to d di was before Public Wealth of Cities was published. In fact, if you looked on the dust jacket of Public Wealth of Cities, my claim to fame is I gave one of the endorsements to dad’s book when that came out. But the predecessor of that book was the Public Wealth of Nations. And so I got to know dag, you know, and as a mayor, I was the mayor of Salt Lake County at the time, and I know how challenging it is to try and find resources to solve some of the issues we were confronting. One of the things that I was working hard on was advancing early childhood education. We know that that that closing the achievement gap is critical to the success of our residents is working on homelessness and addiction and trying to help individuals who are suffering from addiction to get resources to treatment to become sober and stable.
Ben McAdams (8m 12s):
And you know, I’ll tell you, having worked through that, I know that money doesn’t solve problems, but you’re not gonna solve a lot of problems without adequate funding. And so it was always a challenge. And I know that local government, like we didn’t have the money to fill our potholes to do basic, basic core function of government stuff. And so for me to be saying, Look, we need to invest more in in addiction and treatment and be investing in early childhood education, people would just say, Well, how you can pay for that? And so it was around that time that Bruce Katz introduced me to DAG and and the concept essentially was that if all you look at is your revenue and expenditures, yeah it’s tight. We don’t bring in enough money to pay for the expenditures that we have to pay for.
Ben McAdams (8m 54s):
But what government doesn’t do is, is look at the balance sheet. You know, in fact it wasn’t until very, very recently the government was even expected to have the concept of a balance sheet. And so dad’s premise was, if government to look at their balance sheet inventory, what you have quantify the value of that, we are actually sitting on a gold mine of resources. And if you can tap that balance sheet to put it to work to generate revenue back to the community, it’s actually quite a bit of opportunity there. So we put dags premise to the test. We did an inventory of all publicly owned, commercially viable real estate assets in Salt Lake County.
Ben McAdams (9m 34s):
And what we found was, first of all, there was a lot and we made some assumptions. We worked with Urban Three to quantify these. They’re all out there, you know, they’re all in gis so we can find them and organize them and pull them out. We made some assumptions to figure out what the value of those were in their current state and then what they would be if we put them to work as neighboring parcels are put to work by private owners. And what we found was that we were sitting on a portfolio of commercially viable real estate assets valued at roughly 45 billion. My budget when I was mayor was 1.1 billion. So we had a 45 x of real estate assets that we were sitting on.
Ben McAdams (10m 14s):
And you know, you don’t have to think too hard to say, Let’s say we just take a handful of those, let’s take three, you know, parking lot that is underutilized. A library that you know was built 60 years ago in the middle of nowhere and is now in a densified transit oriented part of downtown. And we could put those to a different type of use and generate revenue off of those assets. And those that revenue, you know, maybe those three parcels that could generate a million dollars a year that goes into fund an early childhood program to fund vouchers for treatment or access to affordable housing. And indeed there is a lot of potential there. We saw that in Salt Lake County and what we’re doing now, we’ll talk about it later, but with putting assets to work incubator that I, I helped to found, we are working with communities across the country to evaluate their assets.
Ben McAdams (11m 1s):
What balance sheet do they have? What we’re finding with all of them is they have resources, they have assets that they’re sitting on. We’re working with them to come up the structure to help unlock and tap into those resources to have funding so that people like Diana can have the resources to put it into the equity initiatives, the social impact initiatives that can really turn communities around.
Jeff Wood (11m 23s):
And Deanna, you’re working on this for Harris County and I’m wondering what the impetus was for you to apply and why Harris County’s a perfect match for this idea of inventorying assets in finding the public wealth in the county.
Diana Ramirez (11m 35s):
Yeah, we got really excited about the program. The incubator is the grant partnership between Sorenson Institute and then the Government Finance Officers Association. And I’ve been a member of the G A for, you know, over a decade. You know, I like the work that they do. And so when I saw this work, it was something that I was doing in a less sophisticated way. At my previous job I was at Travis County, which is Austin. I was in their planning and budget office and part of my work was in space planning for the county. And we identified a bunch of underutilized parcels that, you know, we’ve been working on trying to figure out how to better use them for community benefits or creation of revenue streams for the county.
Diana Ramirez (12m 17s):
And we had a very limited number of parcels, but we still had some that we could use. So when I moved over here, I saw that no one was doing that work and I saw the grant application come through through an organization, I’m a member of us, like oh my gosh, I really wanna do this. And I was super excited that we were actually selected because the city of Austin had applied also and Boston always gets everything. And I was like, no, you know, they’re gonna beat us out. But I was so excited that they, we were able to to get the grant. And you know, in just looking at R G I S mapping system, you know, just a quick look, I saw that there were 345 parcels just owned by Harris County that were titled as building or vacant.
Diana Ramirez (13m 2s):
And the vacant, I’m assuming were parking lots and things like that, but 345 parcels, those are a lot of parcels that we could do something with. The other area that I was very concerned about was reason that I wanted to do this is that as the new flood maps come out, you know Harris County is whole flood claim, we have like 34 bas running through Harris County. What’s that gonna do to land available for development, right? How are we gonna handle that? And we’re already seeing increases in home prices and we’re already seeing a lot of displacement anytime that we’re trying to improve infrastructure in certain areas. So let’s use the assets that we have already to try to write some of those inequities and be a little more progressive in how we handle the attraction of development without displacing historic communities.
Jeff Wood (13m 55s):
Yeah, that’s really important. And as somebody who was born in Houston and actually in Humble and went to school in Austin, I understand your sentiments about what’s going on both places. Well Matt and Joel, you all have outlined a system for cities and counties to inventory their wealth and manage it better. Your system is really compelling. The idea that number one asset wealth and cities is undervalued and undermanaged to unlock with Henry George style land tax three limit speculation, which I think Deanna is discussing as well. And four, apply to these urban wealth funds. So my question to you all is how do you think that we got here initially and why do cities not know or understand the wealth that they have?
Joel Rogers (14m 32s):
Well, I mean why don’t people understand the wealth? Because you have an entire culture and system dedicated to obscuring obvious facts
Jeff Wood (14m 43s):
Care to expand.
Joel Rogers (14m 44s):
Well, I mean the last 50 years, and we can go back further, but certainly the last 50 years have been one of, you know what’s commonly called neoliberalism, Sort of the idea that private markets pursued by quite predatory guardians within finance are the way to generate social prosperity. And I actually like markets, markets are fine, but markets are very, very useful Tools in the wrong hands, in predatory hands can really mess up a society in a big time way.
Joel Rogers (15m 24s):
This society has record levels of inequality now, both in wealth and in income. There are a lot of people who’ve been abused within the society and obviously getting sort of tired of it and have been able to articulate that fatigue and that rage and that hurt I think more effectively in the last 50 years than, than in the previous several hundred in the us. So you have a combination of the society that is manufacturing unbelievable amounts of scarcity when it could be enjoying unbelievable abundance. And you’ve got a series of power structures that are pretty clearly illegitimate.
Joel Rogers (16m 6s):
I mean, let’s go with Martin Luther King, right? Power without love is reckless and abusive, but love without power is sentimental and anemic To look assets, arely your control in allegedly democratic, very, very from democratic accountability is a great way to start a very hopeful discussion. But doesn’t surprise me at all that that’s not a public discussion that we’ve had before. Dad’s work and, and other related work, I mean there’s a lot of interest in the revival of Henry George I teach at university and kids are just now discovery, you know, Henry George for the first time.
Joel Rogers (16m 49s):
You know, go figure that.
Matt Prewitt (16m 52s):
I think one of the biggest reasons we’ve gotten into this situation of public authorities, you know, sort of not managing these public assets optimally in the public interest is really just kind of a lack of creativity. And one of the reasons I think we’ve gotten here is we’ve become trapped in a sort of a false dichotomy between public and private. So, you know, on one side of the spectrum we have the idea that, you know, public authorities should technocratically make all the decisions that they can to manage assets in the public interest, which often frankly exceeds their capacity, right?
Matt Prewitt (17m 33s):
I mean, governments are collections of people that often, you know, don’t have the bandwidth to make the perfect decision about what to do with every single asset that is under their management. And then on the other side of the spectrum we have privatization, which is like, you know, the pendulum swings all the way to like assigning public property to private interests and managing it for maximum profit extraction. Cities don’t want to be in the position of, you know, entering into an adversarial landlord tenant relationship with the people in their city. So there’s like a vast unexplored territory between these two polls that I think we’ve simply lacked the creativity and experimental will to explore.
Matt Prewitt (18m 20s):
And you know, he, Henry George is one thinker from the past who’s, whose ideas kind of gestured towards that middle ground. And there’s a lot of other interesting ideas that have been developed in recent decades about how to do that as well.
Jeff Wood (18m 32s):
I wanna kind of go to a comment that you made about privatization. So I wanna kind of ask the group, you know, what’s the difference between a public wealth fund and this idea of privatization? Cause I think there’s a lot of ways that they can get confused if allowed to.
Joel Rogers (18m 46s):
I think it is a very different thing. A public wealth fund is a way of saying, okay, what is currently under the public ownership and how can we use that better to benefit the, the public part of that is generating the revenues that, that Ben was talking about. But there are other ways in which you want to use those funds. Privatization is taking some public good or public service and eviscerating its structures of public accountability and handing it over to private for-profit providers to substitute for that, which used to be provided by the government. To go back to some, Matt was saying, I mean a big thing is hanging over the conversation in cities and in government in general in the US is that you’ve had a tremendous decline in confidence.
Joel Rogers (19m 40s):
We’ve never been real confident in government in the US but I think the level of confidence in government being able to even do things correctly has reached something like a Nader in large parts of American politics. So the idea that, well you want the public people then say public equals government, Matt’s point, it does not equal government necessarily means the public public wealth fund. My goodness, that means that government operate thing and it’s gonna be subject to the same sort of corruption and grant seeking and and ridiculous shortsightedness and, but above all incompetence that people usually associate with government, but public wealth funds and privatization, maybe they’re confused in some people’s heads.
Joel Rogers (20m 26s):
I think of them as almost polar opposites. One is taking a public asset, maybe not well managed one and just giving it over to private for profit entities. The other is taking underutilized public assets and using them for the public good using markets and using possible revenue generating facilities as part of it. But, but it’s very much controlled by public purpose rather than a private purpose.
Ben McAdams (20m 56s):
I’ll jump in there too. First of all, let me say Joel, I actually, when I was a mayor, went to the mayor’s innovation project a couple of times, fantastic work, always came away with big ideas and, and fueled a lot of the creativity in government. So thank you for your work there. I think you hit on some things and I wanna bring it back to what Matt said too about rejecting the notion that there are two polls and it is either public or private because that sets up a false dichotomy. And I think it’s one where it’s adversarial and zero sum, right? That the, in order to, for the private sector to do well, the public sector has to do less well. And I think that there’s a way to approach these that isn’t adversarial, but you’re somewhere in the middle. So first I wanna go back to the notion.
Ben McAdams (21m 36s):
So these are oftentimes called urban wealth funds playing off of the notion of sovereign wealth funds, right? So it’s a maybe a, a municipal equivalent of a sovereign wealth fund, but that is not a privatization. That is saying we have public assets and we are going to manage those public assets in a way that is, is professionally managed with the expectation that it generates a return. And you know, akin to I I think you could look at how public pension funds are managed, right? So you have retirement funds that are put into a a pension fund. You have employees who make investments decisions over those funds, but they manage them for the public benefits. So that’s kind of what this is about. I resist from using tell you, I resist using the words Urban wealth fund for some of the reasons that Joel mentioned, but I am, my political career have been a, a democrat in, in one of the most conservative states in the country.
Ben McAdams (22m 27s):
So I’m always sensitive to the terminology that we use. And urban seems to put people on their heels a little bit, especially when you’re talking in suburban and rural areas. Wealth, nobody likes to think of their government being wealthy and then fund is a word that the Democrats hate to even think of fund. So I I, I don’t know what the better term is. That’s why we are calling our incubator putting assets to work that is just plain vanilla descriptive right now until we land on a, on a different word I think that doesn’t have people on their heels. But when I think about what we’re doing with this, it’s getting away from that dichotomy of if the private sector wins, government loses or look there think there are things that government does well and things that government doesn’t do well and there are things that the private sector does well as long as you’ve got guardrails and incentives and accountability over private sector.
Ben McAdams (23m 14s):
There’s something about that hunger, that 24 7 hunger to get every last drop out of an opportunity that I think we can tap into for the benefit of government, for benefit of communities that where you align those interests where you’re bringing in some of that professional management that exists in the private sector without selling off and privatizing assets, keep them under public ownership. You keep them working for the public benefit but you tap into some private sector partnerships that aren’t adversarial but are more aligned to help you do that.
Jeff Wood (23m 48s):
Now Diana, is this something that Harris County might think about doing? Is creating a, putting the assets to work? I’m trying to be nice with the language now.
Diana Ramirez (23m 57s):
Yeah, yeah, no, I mean I think at local government level even every little grant that you apply for has to get your governing boards approval. So it did get approved by the Harris County Commissioners Court. Our county administrator is excited about the idea and in Texas our legislature is, you know, every two years they’re in session and, and they’re always looking for ways to box in local governments so they can’t erase taxes. So you know, they’re more limited. We have, you know, revenue caps right now in place. So you know, the more we’re limited in Texas counties main source of funding is property tax, right? We don’t have sales tax, that’s the cities in special districts. So we just don’t have that much to rely on.
Diana Ramirez (24m 40s):
So the idea that we could actually use our assets to create some revenue that’s non-property tax revenue is very appealing on the financial side. And then on the equity side, the idea that, you know, we can actually use these assets in partnership with the community that’s surrounds that particular asset to make sure that we’re doing something there that the community that’s already there wants to see in their neighborhood, in their area I think is a really good way to to think about it. In Travis County we did something like that for a parcel that we had called it our north campus area and we have a couple of parcels that we owned and then a corner parcel that we didn’t know what we were gonna do with it.
Diana Ramirez (25m 22s):
We bought, it was no gas station cleared, all the underground storage tanks, that kind of thing. But we wound up being able to, to do a very kind of complex deal where the front part of the project became our Health and Human Services flagship building. The back part was a parking garage that was wrapped with low income housing tax credit, affordable housing units. So we wound up with I think 242 9% units. We were able to work with the neighborhood associations all around that parcel and made sure that they were all happy with it too. We got their input, we have a bunch of meeting rooms built in.
Diana Ramirez (26m 4s):
It took a long time, it took a lot of effort. We had to hire a bunch of different kinds of experts, but it’s in place and in an area like, like that where you have the Austin Metro Red Line, you have a lot of bus transit in that area, it’s a gentrifying area, it’s a growing area, it’s wonderful. And you know, it was a first time we’d ever done something like that and we used, we cobbled together so many different kinds of authorities and laws to be able to get it done. But it worked. And I think that that’s the same thing that we can do in Harris County. And my idea is that once we get the asset map from this project and we see the values, I wanna pick low hanging fruit, I wanna pick our proof of concept, I want something that everybody can see the value of and that that’s what we go with.
Diana Ramirez (26m 54s):
And then we build out a bigger portfolio of what we can really do. Once we show that proof of concept, then I think we can go much deeper and harder with the whole project to make sure that we can get not only a revenue stream in some instances, but in other instances we might not get as much revenue, but we’re gonna get the community benefits there. Whether it’s that we’re having the construction contractors have to have apprenticeships and, and use union labor and have living wages or whether it is that, you know, you’re setting up open space and green space for the neighborhood use because they don’t have that there. Or you’re building affordable housing units there or some kind of below market rate, small commercial areas for minority and micro-businesses.
Diana Ramirez (27m 44s):
I mean I think that those are the kinds of things that we can balance and come up with a, a different look for each project based on the needs in that area. And that’s what really excites me that we can make it very place-based.
Jeff Wood (27m 57s):
It’s really exciting that you can actually, you know, pull together these resources and kind of learn what’s on the ground. Because it seems like, at least from reading the kinder article, from reading a bit of dag debtor from reading Matt and Joel’s work, it seems like there’s a lot of places that I could actually do these inventories and find out that they’re massively under-resourced in terms of like understanding what they actually are sitting on top of. But the process for creating an inventory seems very straightforward, fairly straightforward anyways and not too expensive. It seems like a lot of places aren’t doing it though. Is there a specific reason why you found that they’re not doing it or is it just they don’t know that they can do it?
Ben McAdams (28m 34s):
I think first of all, people just don’t know where to start. And what we found, what I found when I was mayor is it actually is surprisingly simple. A lot of this stuff because of GIS and technology, these parcels, the portfolio’s so big that people just don’t know even where to start. But it’s all there. And so it’s a matter, you know, I mentioned that we’ve been working with Urban Three and they’ll pull them out, they’ll put ’em on a geospatial map, you can see them, you know, red dots are public parcels. We go through it, we’re working with people like Deanna right now in Harris County through our putting assets to work incubator. And we’re mapping these geospatially then you’ll look at it like in Salt Lake County, what we looked at is we found that, you know, big portions of publicly owned parcels are watershed and back country and we don’t wanna touch those.
Ben McAdams (29m 15s):
So we take those off the map. But you, you look at the ones that you don’t want to touch and you left with some that are underutilized parking lots or buildings that really could, could generate more opportunity. And that’s, that’s an exercise, but it’s not a, you know, it’s probably a three to four month exercise. I think, you know, roughly 75 to a hundred thousand dollars depending on how big your jurisdiction is, is what this process would cost. So it’s, it’s not insurmountable. And what happens then is people see is, is Deanna mentioned you see some real low hanging fruit and you say we’ve got a world of opportunity, we’re gonna start with these two or three opportunities and it’s gonna be the fuel that funds an equity initiative or an environmental initiative or early childhood initiative.
Ben McAdams (29m 56s):
And it, it’s really getting from not knowing at all what you have to seeing what the world looks like, but it’s big and it’s intimidating to think about biting off a 45 billion portfolio to then saying, okay, we’re not gonna bite off a 45 billion portfolio, we’re gonna take three parcels. And those three parcels are gonna do something that’s impactful and meaningful in the community and the community can see what would happen without raising taxes.
Joel Rogers (30m 20s):
Yeah, given the GIS stuff is available everywhere, a lot of this stuff is, virtually all of it we’ve found is available through public sources. You know, I’ve got an undergraduate now who’s doing these maps, you know, we’re working with Man Cozy and Taylor and the other folks in Urban Three the firm, but we’re basically just doing it with student labor now we’re doing it for I think 35 or 40 of the mayor innovation project cities right now. And you know, it’s, it’s a little bit of work. They’ll say it’s a lot of work, but you just talk about a couple different people giving at least a skeletal picture for these cities and then you go back and say, Oh no, I exactly what Ben said, you know, we don’t wanna take some park and turn it into, you know, condos or something.
Joel Rogers (31m 10s):
We wanna preserve the genuinely public purposes that are fine right now. But it’s very easy to find these data. It’s amazing though how few cities have decent reporting in a way that someone outside that city can easily access. We’re trying to get, do a value per acre analysis of all these cities and and you’d be amazed at the number of cities that don’t know how much they’re getting on a parcel basis in a way that someone outside that city can grab a data file from.
Jeff Wood (31m 41s):
And some of the data is a little wonky, it’s not quite the same between counties. I know that when I used to work on t od databases, you know, at my old job basically, you know, you’d look at let’s say St. Paul and Minneapolis, Ramsey County and Hennepin County and when you looked at the green line that goes between the two of them, the parcels didn’t match up because their systems for reporting them were so wonky, you know, as opposed to each other. So it’s kind of hard to do in some, some instances because of that. You know, I think it’s probably gotten easier since I was doing it, but at the same time, you know, it’d be nice if, if cities could put together kind of a way for their parcel databases to tell you this information. That seems like low hanging fruit, like you all mentioned.
Joel Rogers (32m 18s):
Yeah, everything’s gotten easier since you did,
Jeff Wood (32m 22s):
I won’t tell you my age.
Ben McAdams (32m 23s):
Well and you know, and what I would encourage people to do is to just get that data, put it out there. This is an iterative process, but if you see what the potential is, it, it begs the question of how can we, where do we start? Right? And that’s the key is just getting to the point where you have a leader like Deanna and a city who has an initiative that she’s doesn’t know how she’s gonna fund it. And then she sees this low hanging fruit there where they can do it. I know, you know, you think I was a mayor with a billion dollar budget, which is probably pennies for but in Harris County. But you’d think that with the billion dollars, there’s just like cash lying everywhere that I can use and put it into any, any initiative they wanted. But the reality is, is every penny is programmed and if I wanted to pull a hundred thousand dollars for a trail, what was I cutting or who was I raising fees or taxes on In order to do that and to have these opportunities here, there’s, there are things that are local governments need to invest in core functions of our communities and supporting our communities and there just aren’t the resources to do that.
Ben McAdams (33m 22s):
And yet we’re sitting on this gold mine of opportunity and it’s really not that complicated or expensive to JustCo it and get these opportunities flowing to the people who can then deploy them in a way that that lifts our communities.
Diana Ramirez (33m 37s):
And I think also, you know, in local governments, lots of times the folks that are in charge of the real estate are really separated from the programmatic folks who are looking for ongoing resources, you know, so we got this grant application submitted in the spring and then got it awarded like around May or so, and right at a commissioner’s court meeting right after our grant contract was approved, they had an item where they were, where real estate folks were putting a parcel up for sale, right? And I was like, Oh man, we’re selling a parcel already. Come on. And it’s right, you know, off of the six 10 loop for those of you who know Houston area.
Diana Ramirez (34m 20s):
And it was a building that we had a department that grew it, so they moved them to another building, another facility they had bought. And so now they were selling this. I’m like, well this is gonna be a really good, you know, example for us to show, I’ve been watching it to see how much they’re gonna get for this, right? How much are we gonna sell this for? And then I wanna see, cuz it’s, it’s still listed as a parcel that Harris County owns. What’s gonna be the value of it, you know, based on this grant and the assessment that happens there by Urban Three. So I’m really interested to see how that’s gonna show the difference. And I, I would bet that we’re not gonna get any amount close in selling it then what, you know, we’ll see it if we had redeveloped it and kept it.
Diana Ramirez (35m 4s):
So I, I think that there’s just such a disconnect in, in local government and people are just busy doing their own little work in their own little silo and they’re not thinking bigger picture.
Jeff Wood (35m 15s):
I think that’s a really good point and especially since, you know, you can sell something for a capital and you get a one-time infusion of money or you can keep it and have a long-term stream of income. And I think that there’s needs to be an understanding about what that means for the, the fiscal, you know, sustainability of cities. And Matt, that kind of goes to your and Joel’s land license idea. Can you explain that a little bit in terms of what you think that, you know, you could do by changing, changing the way that we look at like assets in these ways?
Matt Prewitt (35m 40s):
Sure. It’s a great transition because I think it’s really important to see as a preliminary here that in most ways, you know, even if the public authority is able to get a good price for, you know, selling land or real estate, it’s really not in the long term public interest to do that. There’s, there’s always gonna be a better way of serving a public interest than like, sort of fully disposing of land into the private market and allowing a, a private owner to maximize profit from it, you know? But then on the other end of the spectrum is sometimes difficult and beyond the capacity of a city to manage property as a landowner. So in between these two options, there’s a really interesting unexplored territory of new forms of licensing basically that cities can use and explore to ensure that public interests are really well represented, but also ensure that the sort of private sector logic is brought to bear to a certain degree in thinking about how to optimize the, the use of the land.
Matt Prewitt (36m 42s):
So to quickly sort of summarize this kind of innovative licensing that I have in mind here, you might imagine sort of periodic licenses sort of like terms of occupancy for a piece of land being like re auctioned every year or so. So imagine, imagine if like you take a piece of land and every year or so a special license that land is put up for auction, the winner of the auction is able to basically act like of the private owner of that land, but only for a year, right? Then it goes up for auction again. And during the course of that year, the winner of the license auction pays a, a fee to the public to the city that’s calculated as like a percentage of their winning bid for the license.
Matt Prewitt (37m 28s):
And then one more really important feature of this, this license design is that at the end of the period when the license is re auctioned, when it’s put back up for auction, the winning bid is paid not to this city, but to the prior owner of the license. So what what this is, this is like a very interesting sort of hybrid of rental interest and ownership interest held by the possessor of the license. And if you increase the fee that the license holder has to pay during the period that they own it, it starts to look more like a rental interest. And if you decrease the fee that the license holder has to pay, then it starts to look more like an ownership interest.
Matt Prewitt (38m 9s):
What this allows you to do basically is to get entrepreneurs to sort of put their collective intelligence to work on how best to use land in space, but also to ensure that the sort of movement in the price over time is resulting in, you know, a higher stream of payments to the public. So if the land goes up in value over the course of several years, that upside is in a very, very meaningful way shared with the public and not fully privately captured. So you can sort of think of the system as like a, like a dial that you can turn between having a fully private interest on one hand and a rental like interest on the other.
Matt Prewitt (38m 50s):
And by exploring this dial, by exploring licenses that are sort of set at different places on this dial, you can give another tool in the tool belt to cities that are trying to put assets to work by allowing them to wear appropriate, allow more private logic to be brought to bear and where that’s not appropriate, essentially exerting more public control over the land.
Joel Rogers (39m 14s):
There are a couple things that, that always come up in this discussion, which I’m sure no one really understood perfectly in terms of, you know, all the different licenses and, and the auctions and other stuff. But basically the thing that Matt’s describing that we try to describe very briefly in this article gets you tremendous greater accountability, which would interest people like, well, like everyone on this call or anyone listening to this now because instead of just sitting on land and waiting for its value to go up and, you know, encouraging speculation in land, the license thing and the fact that you have to put it up for auction on some regular basis.
Joel Rogers (39m 57s):
One thing always is how long is the license good for? Is it a year? Is it two years, six months? How often do these auctions come up? But the auction stuff, it was a brilliant idea that started trying to root out corruption, you know, a prominent South American country where you had all these owners that were not paying their taxes at all and the thought was, well at least get them to declare some values of different assets they had, in which case you would just take them away or be able to buy them if they emphasize it too low. You know, that sort of a, of a tax on things is a, a great way to get people to be clear about what value they actually attach to different properties.
Joel Rogers (40m 44s):
I just wanna emphasize the accountability stuff and the increase in accountability of whoever has the license is one great feature of the thing that we’re pushing for in the, in the no.
Jeff Wood (40m 57s):
And my understanding is basically public land and you have this license system for each parcel in the public land and then you have this auction where you can auction off basically the rights for it for a year. And then what you can do if once you get the, the money back from the sales, you can actually use that to buy more parcels or buy more land and then eventually bring a system that’s more like a Georgia system through a whole city rather than a parcel by parcel system overall.
Joel Rogers (41m 21s):
Well, yeah, that’s part of the hope and the license is the city would get some direct revenue from the licenses, you know, because that is a source of revenue from the city, the license itself, whoever has it in, in a quasi public slash private system. The important point is the one that Matt emphasized that at the end of your license period, let’s say you lose the auction, you will get whatever was the winning bid for that license, the previous owner gets that bid. So it’s not like you put your, I don’t know, your house or your property or your building or whatever up for auction every couple years and if you lose the auction, you lose everything.
Joel Rogers (42m 3s):
No, what you’ll get back, what the market says, the value of that property is at that point, you just won’t be able to lie about it.
Matt Prewitt (42m 12s):
To give a little bit of flavor of what this would feel like, it’s important to see that the price for a license for a piece of property in this system would be much lower than the actual like value of owning that land. So if you imagine like a million dollar parcel, you know, buying the license to it for one year or two years would cost much less than a million dollars. That might cost $300,000 or something like that. But if the land appreciated, then the value of your license would go up correspondingly. So if you get a 50% appreciation land, then you’re the $300,000 that you paid for a license at the end of your license period. If you don’t win the auction again, you’re gonna get paid $450,000 to give your license to the next steward of that land, basically.
Matt Prewitt (43m 0s):
So it’s like a, it’s sort of like an ongoing stewardship system that will, that allows sort of private entrepreneurs to think about how best to use the land, but ensures like an ongoing proportional stream of payments to the public corresponding to the fluctuations and the value of that land. And that, you know, reflects a really, really important insight, which is that, that the value of land in cities is created primarily by the network of people living in the city. Their economic exchanges, their cultural activity, the fact that they’re living their lives and and doing interesting things around every particular parcel is what makes parcels so valuable.
Matt Prewitt (43m 41s):
And this is a way of, of ensuring that that upside of real estate is not entirely held by private interests
Joel Rogers (43m 50s):
And predatory speculators.
Ben McAdams (43m 55s):
I would just say what’s, what an interesting approach and you know, far too often I’ve seen the exact opposite happening in government. Going back to Matt’s concept of the two poles of public versus private. What I see oftentimes government does is we will sell a parcel and then we will come in because we care. We’re, we’re not like a typical landowner. We don’t sell and leave, we sell, but we care about the community, we want to see the community improve. So we’ll sell a parcel and then we’ll put a transit stop next to the parcel and a trail next to the parcel and we’ll upzone the parcel and we’ll improve fire service to the area. And also in that parcel that we sold for 5 million is now worth 10 million because of all the community benefit we’ve put into it.
Ben McAdams (44m 35s):
But the community doesn’t receive the upside from all the work that we’ve done. And so the, what I think is key in this work is you don’t just fire sale a parcel to patch a budget hole today. You know, you fire sale it, you fill some potholes, but you actually, if, if we know that the community come hell or high water is gonna be invested in, in making the community a better place, then capture some of that upside and return it to the residents who are making that upside happen.
Joel Rogers (45m 3s):
Yeah. You wanna retain the public ownership the underlying, you know, fee that you wanna increase. This goes back to what you were saying, Jeff, you wanna increase that over time. Ideally this will sound very communistic, but you know, that’s okay eventually I’d like all the land within the city to be publicly owned in this sense. But I, I definitely wanna get the dynamism of the market activity and that’s, that’s where the license stuff comes in.
Diana Ramirez (45m 32s):
I’ve never heard of this and I’m kind of like, whoa, it’s blowing my mind. So, you know, is is this, are there examples where this is being tried? I’m just, I’m curious.
Matt Prewitt (45m 42s):
Yeah, so there are some really interesting historical examples. Like, so basically tax structures that strongly resemble this system were really, really popular in German cities pre World War. I was like one of the, one of the best sort of historical data sets for this type of system, oddly enough. And in the, you know, for reasons that are, you know, far too obstru to get into this, these, this interesting system of land possession was like scrapped in the, you know, turmoil of World War I Systems that are very similar to this have been used in Taiwan and Estonia at various points in the, in the 20th century.
Matt Prewitt (46m 24s):
And another important sort of precedent here is, you know, more conventional land value taxes inspired by Henry George, which aren’t exactly this kind of auction based licensing system, but they fundamentally have the same kind of economic logic have been used for much of the 20th century in a number of cities, particularly in Pennsylvania. A lot of cities had land value taxes throughout the 20th century when this kind of thing has been faithfully implemented, the results have been good. It’s an idea that, you know, for, for obvious reasons, just listening to me over the past few minutes here, you can see that it’s a little hard to wrap your mind around a little hard to sort of fire people up about and get excited about. But it has, you know, worked really, really well wherever it’s been really tried and good faith over the past century plus.
Matt Prewitt (47m 10s):
And it’s time to roll it out more.
Jeff Wood (47m 12s):
Well, Ben, what’s next on the agenda for the incubator?
Ben McAdams (47m 15s):
Well, so we are working with the communities right now to map their assets and help them to understand what opportunities they have. Inevitably that’ll show an incredibly large opportunity pool. And then I think, you know, Deanna said the next step is probably to identify some, some low hanging fruit, some easy implementable opportunities, the the vacant parking lot, the underutilized or vacant building that we can turn around and to marry that to a key community need. And so now we’re gonna look to leaders in the city who say, a top priority in the city right now is, you know, affordable housing or one of our incubator cities is looking at climate resilient infrastructure or equity and, and inclusive initiatives.
Ben McAdams (47m 56s):
And so we’ll look at them to say, look, okay, we can take some of these opportunities, generate some, some revenue or, or maybe building housing units or other things on site that can help to solve that problem. And we wanna just show some proof of concept, how this is working, that it is possible to activate these unused assets and put them to work to benefit the community. So right now we’re finishing the asset maps. Next step is to propose a structure for how to move this forward. What what tools can the communities use to do that? And, and at the end we’ll be delivering to the jurisdiction playbook and a roadmap for, for taking steps to implement this. And, you know, I would encourage any other local governments that are, are, are intrigued and interested in this I idea to please just reach out, we’d be happy to talk to you.
Ben McAdams (48m 40s):
There’s no, you know, we’re not, this isn’t something we’re gonna patent and keep it as a trade seeker. We want to have everybody see this work and to unlock the opportunity in their own community so they can find more about it at the landing page for our incubator, which is G f a.org/pw, it’s our putting assets to work incubator or just feel free to email me on my personal email just ben McAdams gmail.com
Jeff Wood (49m 3s):
Indiana, what’s next for you all?
Diana Ramirez (49m 5s):
Well, we’re working with Urban three on the map and we wanna have our, kind of, our roadmap that we can get from the grant project and then present it to court, to our commissioner’s court and have them take a look at it and give them some ideas on which we think are the low hanging fruit that we wanna get started with and propose a project and move forward with a project. We’re hoping that that’ll happen, you know, next year, early next year.
Jeff Wood (49m 33s):
And Joel and Matt, when can we see this licensing system put into practice?
Joel Rogers (49m 38s):
Well, that’s a big question, Jeff, but when the power of love overcomes the love of power, there will be to quote Jimmy Hendrick soon, soon, No, no promises. I we’re very excited about the g a experiments and you were asking about next steps. My next step is to invite Ben and to come to the next mayor’s innovation project meeting in January. We’re gonna be talking about this among other things. And we’ll be from cows unveiling are not as like three, but our very basic asset maps done by that undergraduate with a little bit of help from me and a few other people. But cities have to see this stuff and have to have this discussion to have it come alive.
Matt Prewitt (50m 22s):
There’s been a, a real embrace of this kind of licensing system in the world of digital assets and sort of programmable assets. So a lot of people in that world who are thinking about how to encode new forms of asset possession and who have that space of experimentation, of just being able to, to program things, are really, really excited about this way of thinking about sharing power over assets basically. And so there’s a ton of experimentation there, but we’re, we’re really, really excited to work with any sort of city officials who are trying to put assets to work in the public interest and are, you know, up to experiment with, you know, what is really potentially quite transformative way of bouncing the public and private logic.
Joel Rogers (51m 8s):
I think it makes a very, very rich environment for this, you know, pretty radical reframing of a bunch of discussions in particularly urban areas. You know, all the aftershocks of, of covid and remotes work and everything on the major, you know, commercial real estate prices in lots and lots and lots of cities. They, that still hasn’t settled out. And the other is this mountain of new money coming down from Biden Harris. It’s too little and it’s too, maybe too late, but, but it’s a lot more money than these cities have seen a very long time. And so I think people are looking to think about, okay, let’s, let’s try to start reinventing our, our cities in a more equitable way.
Joel Rogers (51m 56s):
We have a little bit more money now from the feds. We have a bunch of commercial landlords that are freaking out. We’ve got obvious problems on housing. We’ve got all sorts of concerns around equity, mobility. We’ve got a climate crisis and we’d really like to reduce our carbon footprint and reduce our energy costs. It’s a very promising time, I think, for innovations of the sort that Matt and I were trying to talk about that Ben’s advance, that Dean’s trying to, you know, move forward in Harris County. It, it’s a great time for mixing things up is all I’m saying.
Jeff Wood (52m 31s):
I think that’s great. It’s a good way to end the show. Joel, Matt, Ben and Deanna, thank you so much for joining us. We really appreciate your time.