1) Doing everything possible to defeat or derail efforts to keep enhance the ability of ordinary consumers to hold corporations to account for wrongdoing in the civil justice system;
2) Preventing ordinary people from organizing together in unions and defeating any regulations that protect workers from arbitrary managerial controls; and
3) Preserving the sacred right of corporations to profit by polluting, fighting vigorously against any regulations that require corporations to take responsibility for toxins and waste products emitted.
Reprinted in full with kind permission of Public Citizen.
The United States Chamber of Commerce is well known as the nation’s largest lobbyist, having spent over $1.2 billion on lobbying since 1998.(FN1) The Chamber is also infamous for the huge sums of secret money it spends on elections, totaling more than $130 million since the 2008 election cycle.(FN2) And while the Chamber’s Institute for Legal Reform—which spends tens of millions of dollars(FN3) lobbying to prevent so-called frivolous lawsuits against corporations by seeking to drastically limit individuals’ access to the courts–regularly garners headlines and attention, much less well known is another division of the Chamber: the U.S. Chamber Litigation Center (USCLC).
Despite its small size and low public profile, the USCLC is in fact a key part of the Chamber’s strategic arsenal. Along with lobbying and election spending, the Chamber uses litigation to advance its pro-big business, anti-consumer, anti-worker, anti-environmental, anti- regulatory agenda. Indeed, as shocking as it may seem for an organization that spends much of its time and money seeking to prohibit litigation, the Chamber itself is a remarkably litigious organization; in the last ten years, the Chamber has been involved in over 1100 lawsuits, either as a plaintiff or as an amicus curiae. (FN4,FN5)
This report examines the 501 most recent cases (FN6) in which the Chamber is either a plaintiff or an amicus. It presents a statistical analysis of the courts in which the Chamber filed, the types of parties with which it filed or allied itself, the legal issues it raised, the industries and companies it supported, the governments and agencies it opposed, and the outcomes it obtained.
This report is the first of a two-part series on the Chamber’s litigation. A forthcoming second report will examine in greater detail the arguments it made in its briefs and petitions.
II. Executive Summary
If one were to write a recent history of notorious civil cases in the United States, the United States Chamber of Commerce would be entitled to a starring role. While its involvement in the Citizens United case that expanded the ways it and other corporate interests purchase vast influence over our political system is well known, less well known is its involvement in several other egregious civil cases of recent years:
§ Litigation related to the Deepwater Horizon oil spill in the Gulf of Mexico. The Chamber filed an amicus brief on behalf of BP on four separate occasions, arguing for legal technicalities that would eliminate or reduce civil fines and penalties that government agencies sought to impose upon BP as well as obstruct class action litigation brought by small businesses against BP.
§ Litigation related to the Buckyball magnetic toy responsible for injuring thousands of children. The Chamber filed an amicus brief in support of one of the owners of the company that sold Buckyballs and argued that he should not be personally liable for recall costs in spite of the fact that he had had ample warning of the danger posed by the toy and had indeed fought earlier recall efforts, resulting in a delay that led to further sales—and further injuries.
§ Litigation related to alleged fraud committed by Maurice Greenberg, the disgraced former CEO of AIG, one of the Wall Street firms most responsible for the 2008 Financial Crisis. The Chamber filed twice as an amicus on behalf of Greenberg in a civil fraud case brought against him by the New York Attorney General.
§ Litigation related to for-profit Corinthian Colleges’ fraudulently misleading students. The Chamber filed an amicus brief in support of Corinthian Colleges’ effort to prevent former students from suing it in court for fraud despite the fact that fraud at Corinthian was so widespread that the company was forced to close after several government investigations.
§ Litigation related to the Obama administration’s Clean Power Plan (CPP). The Chamber along with other plaintiffs filed suit to prevent the implementation of the CPP, which would limit greenhouse gas emissions in accord with the Paris Agreement.
Most of the cases in which the Chamber has been involved are less prominent than these. In order to provide a more complete view of the Chamber’s litigation strategy, Chamber Watch examined 501 of the Chamber’s most recent cases. Our analysis looked at the outcome of the case, the court in which it was filed, the role played by the Chamber, the identity and type of any co-filants, the legal issue(s) raised, the industry(ies) involved, the identity of the opposing government and/or agency, and the identity and size of the corporate litigants supported. Our results can be summarized as follows:
§ Frequency: The Chamber files a case or amicus brief roughly every other day of the 5 day work week.
§ Legal Issues: The number one legal issue addressed by the Chamber is restricting access to the courts, defined for the purposes of this analysis as issues relating to arbitration and/or class actions. More than a fifth of Chamber cases dealt with such civil justice issues. Employment and labor relations issues were second. Environmental issues were third.
§ Industries: The industry most frequently assisted by the Chamber’s litigation efforts is the financial services industry, supported in a total of 88 cases. Energy & utilities is next at 80 cases, and Pharmaceuticals and healthcare is third at 50 cases.
§ Big Business: Of the 426 cases in which the Chamber’s filings directly supported one or more clearly identifiable corporate litigants, it filed amicus briefs in support of at least one Fortune 500 company almost 60% of the time. 126 individual Fortune 500 companies (25% of the list) and 35 Fortune 50 companies (70% of the list) directly benefited from the Chamber’s litigation. Ford was the company most frequently directly assisted by the Chamber. State Farm and Dow tied for second. ExxonMobil was third. Koch Industries and Bank of America tied for fourth.
§ Small Business: In comparison, the Chamber filed in support of at least one small business (FN7) only 7% of the time. Only 29 of the roughly 28 million small businesses (0.0001%) directly benefited from the Chamber’s litigation.
§ Foreign Multinationals: The United States Chamber of Commerce filed a brief in support of foreign multinationals (57 times) more often than it did on behalf of domestic small businesses (29 times).
§ Litigation Posture: 55% of the cases we looked at involved one or more individuals litigating against one or more businesses. Roughly 30% involved one or more businesses litigating against a government or government agency.
§ Opposing Government Party: Of the 176 cases in which the Chamber opposed an agency of the federal government or a state or local government, the most frequently opposed agencies were the Environmental Protection Agency (EPA), the National Labor Relations Board (NLRB), the Equal Employment Opportunity Commission (EEOC), and the Internal Revenue Service (IRS). 22 states also found themselves on the opposing side of the Chamber.
§ Federal vs. State Courts: Almost three quarters of cases in which the Chamber became involved were filed in federal court. Of the remaining cases, all but one were filed in state court. One case was pending in a foreign court.
§ Federal Courts & Tribunals: In the federal courts, roughly half of Chamber cases in courts of appeals, roughly 40% were before the Supreme Court, and the remaining 10% were split between district courts and other federal tribunals.
§ State Courts: The Chamber was active in 33 states. More than a quarter of the Chamber’s state-level litigation was before the California courts. New York and Texas were second and third, respectively.
§ The Chamber’s Role in the Case: The Chamber was a plaintiff in 5% of the cases. In the remaining cases, it was an amicus.
§ Alone vs. In Coalition: The Chamber filed its amicus brief or lawsuit alone roughly 40% of the time.Sixty percent of the time it filed in coalition.
§ Types of Co-filants: The most frequent type of litigation partner for the Chamber were other trade associations, which joined the Chamber in 80% of the cases in which it filed in coalition. Legal advocacy groups were the next most common partner.
§ Identities of Co-filants: The Chamber partnered with 439 different litigation partners in the 308 cases in which it filed in coalition. The National Association of Manufacturers was its most frequent partner, joining it in 96 cases. The National Federation of Independent Business was second, joining it in 65 cases.
§ Case outcome: Roughly one quarter of the cases we examined were still pending. Of the remaining decided cases, the Chamber or the legal position for which it advocated carried the day approximately 35% of the time. It lost on the merits in roughly 30% of decided cases, and a request for further review was denied in just under a quarter of decided cases.
This report examined a sample of 501 cases in which the United States Chamber of Commerce was either a party or an amicus.They were chosen based date; we selected the 501 most recent cases (FN8) as listed in the U.S. Chamber Litigation Center’s online archives (FN9). The archives is organized in roughly reverse chronological order according to filing date for pending cases and resolution date for decided and settled cases. The sample of 501 cases examined covers roughly the period from March 12, 2013 through April 18, 2016, or 37 months. Of course, because the archives mixes pending and decided/settled cases, the Chamber’s initial involvement in many of these cases predates this period, and extends as far back as May 2008.
Information on each case in the sample was obtained (where available) for each of the following categories: name of the case; date of the Chamber’s initial involvement in the most recent phase of litigation; date the case was resolved; status of the case; jurisdiction hearing the case; if a state court, the state; if a federal court, the federal court; whether the case was an appeal or not; whether the Chamber supported the plaintiff or defendant; if an appeal, whether the lower court ruling was for the plaintiff or defendant; whether the Chamber was a party to the case; the identities of any co- filants; the type of co-filants; the law firm representing the Chamber; the legal issue(s) raised by the Chamber; the industry(ies) represented by the parties to the case that the Chamber supported; the posture of the case; the government or government agency opposed by the Chamber; the corporation(s) supported by the Chamber; whether at least one of the corporations supported by the Chamber was a Fortune 500 company; whether at least one of the corporations supported by the Chamber was a small business.
IV. The Chamber of Litigation
When it comes to litigation, the Chamber’s motto might as well be “do as I say, not as I do.” For while the Chamber and its Institute for Legal Reform never cease to denounce the “costly” American legal system and the multitude of “frivolous” lawsuits (FN10), the Chamber itself is a prodigious litigator. Because the Chamber’s archives mixes both closed and pending cases in its reverse chronological listing of cases, and because it uses the resolution date for closed cases and the filing date for pending cases, it is difficult to obtain an exact figure for the frequency with which the Chamber files cases or briefs. However, if you only look at closed cases and assume that the frequency with which a Chamber case is resolved does not greatly differ from the frequency with which the Chamber files cases or briefs, then a good estimate of the frequency with which the Chamber files a case or brief is almost every other day of the work week. (FN11)
Chamber President Tom Donohue has even copped to the Chamber’s penchant for litigation, stating, “We spend half of our time trying to reduce the number of suits by class-action lawyers and the other half of our time suing the hell out of the government. We sue the federal government and units of the federal government and some state governments, 180-90 times a year.” (FN12) As we will see in Part VIII, this statement is not exactly true, for with the notable exception of the EPA, the Chamber doesn’t often sue the government; instead, it assists large multinational corporations in their legal battles against various federal agencies, local and state governments, individuals, and sometimes even small businesses.
V. Close the Courts to Consumers, End Worker Protections, and
Pollute, Pollute, Pollute: The Holy Trinity According to the Chamber
In the 501 cases that we analyzed, the Chamber litigated a total of 60 different legal issue areas. Our case analysis shows that of these 60 issue areas, three qualify as idées fixes for the Chamber:
— restricting access to courts,
— employment/labor relations, and
— the environment.
The Chamber litigated a total of 112 cases (over 20% of the total) where access to the civil justice system was one of the primary legal issues involved. [Table 1] For the purposes of this study, we defined “court access” as including legal disputes relating to whether or not forced arbitration clauses would be enforced and whether or not a class action lawsuit would be allowed to proceed.
The second most frequently-litigated issue was employment/labor relations. The Chamber litigated 84 cases (17%) that focused on this issue. For the purposes of this study, we classified any case that addressed the relationship between employers and employees as dealing with employment/labor relations. This definition encompasses a wide variety of sub-issues including the definition of employer, compensation, the right to overtime pay, increases to the minimum wage, the definition of independent contractor, job discrimination, unionization, and H2-B visa regulations.
The third most frequently-litigated issue was the environment. The Chamber litigated 61 cases (12%) that dealt with challenges to environmental regulations. As with employment/labor relations, the environment includes many different sub-issues including laws and regulations dealing with regional haze, greenhouse gas emissions, wetlands protections, air pollution, the cleanup of the Chesapeake Bay, water pollution, fracking, ozone, air quality, groundwater pollution, waste incineration, oil pipelines, mercury, civil penalties for oil spills, and mining discharges.
In our forthcoming second report on the Chamber’s litigation, we will delve into much greater detail on the positions the Chamber has taken in many of these cases.
VI. United States Chamber of Commerce or Wall Street Chamber of Big Oil?
The Chamber of Commerce holds itself out as the representative of American business writ large, and it puts a particular accent on small businesses, especially in its communications and lobbying activities, where it makes frequent mentions of “mom and pop shops” and small businesses whose interests it claims to represent. (FN13, FN14)
If the Chamber were truly so concerned with advocating for the best interests of small business, one would expect that this concern would extend to its active litigation practice. After all, who better to help than small businesses embroiled in expensive litigation, small businesses that probably don’t have the money to hire top flight legal talent the way big companies do?
Such a hypothesis is not born out by the facts. Of the 501 cases we examined, the Chamber intervened on behalf of a corporate party in 426 cases (85%). Out of these 426 cases, the Chamber’s litigation supported one or more small businesses (FN15) in only 29 cases, or less than 7% of the time. On the other hand, the Chamber supported at least one Fortune 500 company in 238 cases or over 55% of the time. Of the remaining cases, the Chamber supported companies that were neither Fortune 500 companies nor small businesses in 131 cases. In 28 cases, it was not possible to ascertain the size and/or ownership of the company. [Figure 1]
The “other” category contains many very large companies as the Fortune 500 list does not include companies with their headquarters overseas nor does it include many large, privately held American companies. A closer look at the “other” category reveals that in 111 of these 131 cases (85%), at least one of the corporate litigants supported by the Chamber had 2015 revenues of over $1 billion dollars. (FN16)
Moreover, in 57 of these cases (44%), the corporate litigant supported by the Chamber was a foreign company. [Figure 2] Many of these foreign companies supported by the Chamber are among the largest multinationals in the world, including Barclays Bank, Deutsche Bank, BP, Shell, Nestlé, AstraZeneca, Samsung, Softbank, Daimler, LG, Mitsubishi, and Hyundai. Incredibly, the entity that calls itself the United States Chamber of Commerce filed amicus briefs supporting foreign multinationals in more cases than it filed in support of American small businesses.
Shifting from the size of the companies supported by Chamber litigation to their identities, it is no surprise that the Chamber’s litigation has supported a who’s who of corporate America in addition to the huge foreign multinationals mentioned above. Ford has benefited from the Chamber’s litigation in the most cases, at 14. State Farm and Dow tie for second, with nine cases apiece. ExxonMobil is third, with eight cases while Koch Industries and Bank of America share fourth place, with seven cases each. Goldman Sachs, Reynolds American, and KBR round out the top five, with six cases each. [Table 2]
As one can see, the financial services industry (State Farm, Bank of America, Goldman Sachs, Allstate, Berkshire Hathaway, Deutsche Bank, Citigroup, Wells Fargo, AIG, and JP Morgan Chase) and the Energy & Utilities industry (ExxonMobil, Koch Industries, BP, PPL, and Shell) dominate the top spots on the list of most aided companies. Pharmaceuticals & Healthcare (Teva and Pfizer) and Tobacco (Reynolds American and Altria) are also well represented.
In total, the Chamber’s litigation directly supported 126 companies (25%) on the Fortune 500 list and fully 35 companies (70%) on the Fortune 50 list of the very largest companies. By way of comparison, the Chamber’s litigation directly supported only 29 of the estimated 28 million small businesses in the U.S. or 0.0001% (FN 17)
With respect to the industries most frequently directly supported by Chamber litigation, Financial Services comes out on top, having been aided in 88 cases (or just over one fifth of the 426 cases in which the Chamber supported one or more corporate litigants). Energy & Utilities was in second, with 80 cases (19%) and Pharmaceuticals & Healthcare was in third, with fifty cases (12%). [Table 3]
VII. Far More than Just the Supreme Court
To the extent that people may be familiar with the Chamber’s litigation, they have likely heard that the Chamber is active filing amicus briefs before the U.S. Supreme Court, as it did in Citizens United. However, the Chamber’s U.S. Supreme Court litigation represents less than 30% of the cases in which it participates.
Overall, 363 cases (72%) of Chamber cases in the sample were before the federal courts while 137 (28%) were before state courts. One case was before a foreign court, in this case, the Supreme Court of Canada. (Figure 3)
Of the 363 federal cases in the sample, only 150 (~40%) were before the United States Supreme Court. Circuit Court cases represented half of the Chamber’s federal litigation activity. The remaining 10% was split between the District Courts and other Federal Tribunals such as the National Labor Relations Board and the Occupational Safety and Health Review Commission. (Figure 4)
With respect to the Chamber’s federal appellate court cases, distribution among the thirteen different federal circuits was very unequal. (Table 4) Perhaps not surprisingly, the Chamber litigated the most cases in the District of Columbia Circuit. The DC Circuit is where most federal regulations are challenged, and the Chamber has repeatedly railed against alleged over- regulation. (FN18)
In second place is the Ninth Circuit, which covers California and much of the West. Here, the Chamber has been particularly active arguing that California laws designed to preserve access to the court system are preempted by the Federal Arbitration Act. (FN19) Close behind in third place is the Second Circuit, based in New York. Much of the Chamber’s litigation here focused on issues of interest to the financial services sector, in particular financial reform and tax law.
Turning our attention to the states, the Chamber engaged in litigation before the courts of 33 states, or 66% of the 50 states. As with the Circuit Courts, the bulk of the Chamber’s state court litigation was concentrated in a few jurisdictions. California courts bore the brunt of the Chamber’s litigation, with 40 cases or briefs filed. Like in the Ninth Circuit, the Chamber’s litigation in the California courts also focused on seeking to limit consumers, employees, and small businesses’ access to the court system through the enforcement of forced arbitration clauses and class action bans. In addition, the Chamber was active in the areas of product liability (much of it asbestos-related) and employment and labor relations. New York, with 17 cases, was second, while Texas, with 12 cases, was third. (Figure 5)
In sum, the Chamber’s litigation strategy is both diversified–roughly evenly split between the state courts, the federal Circuit Courts, and the U.S. Supreme Court—and targeted in states and federal circuits that have jurisdiction over areas of particular interest or concern to the Chamber and its Big Business constituents, namely federal regulations, legal issues affecting the financial services sector, and California laws on access to the civil justice system. As was discussed in Part V, civil justice and environmental and financial regulations are some of the legal issues that the Chamber has most actively litigated.
VIII. When Your Bête Noire is Green: The Chamber v. The EPA
While the Chamber’s considerable appetite for litigation almost certainly qualifies it as a legal gourmand, the doctrine of standing (FN20) limits the number of cases the Chamber itself may bring. As a trade association, the Chamber does not have standing to challenge all government actions. Moreover, given the nature of its work, it will not typically find itself a party to cases focusing on arbitration, class actions, employment law, labor relations, product liability, ERISA, and so many of the other legal issues it cares about.
Perhaps because the Chamber cannot itself sue on so many of the issues it cares about, it has become an incredibly prolific filer of amicus briefs. Indeed, 95% of the cases in our sample are cases where the Chamber is not a party to the case but has instead filed an amicus brief supporting one or more of the parties. (Figure 6)
The fact that the Chamber is a party to the lawsuit in only 5% of the cases in which it is involved should not be seen as minimizing the influence of these cases. When the Chamber sues to block regulations or legislation, these suits can have an enormous impact on policy.
One area where the Chamber has filed cases is with respect to challenging environmental regulations.
Of the 25 cases in the sample where the Chamber is a party to the lawsuit, 15 (60%) are cases where the Chamber has sued the EPA. The Chamber has challenged EPA regulations issued under the Clean Air Act and the Clean Water Act. It has challenged regulations imposing pollution limits on boilers and waste incinerators. It has sued to overturn regulations limiting particulate emissions, ozone levels, and greenhouse gas emissions from a variety of different sources. Sometimes, it has sued multiple times to prevent the implementation of the same rule!
Our second report on the Chamber’s litigation activities will dive into more detail on the arguments the Chamber advanced to try and halt rules designed to protect and improve the quality of the air we breathe and the water we drink as well as take a closer look at its unceasing litigation to stop regulation aimed at combatting climate change, as most recently exemplified by its suit to strike down the Clean Power Plan.
It should also be noted that the Chamber’s numerous lawsuits challenging environmental and other regulations run counter to its oft-stated wish for “regulatory certainty.” (FN21) The Chamber’s legal challenges to the Clean Power Plan have resulted in regulatory limbo of the sort that harms companies’ ability to plan intelligently for the future.
Where the Chamber is not itself a party to the litigation, the amicus brief provides the Chamber with an opportunity to simultaneously influence the course of litigation, and with it, the law itself, as well as to curry favor with the sort of large multinationals that make up its donor base. (FN22) By means of filing amicus briefs, the Chamber is able to address legal issues that it would otherwise not have a platform to address were it limited to litigating cases in the areas where it has standing to file suit.
Moreover, the Chamber provides valuable support to the parties it supports in its briefs. As the United States Chamber of Commerce, it can claim to represent the views of over 300,000 members, including most importantly, small businesses.
For a large multinational corporation litigating a case against individuals or a small business or the government, a supporting brief from the Chamber can provide it with a patina of grassroots support. In cases where a big company is litigating a case against individuals or a small business, Chamber support can also work to blur the power differential between the two opposing parties.
This last point is particularly important, given that over half of the cases (276) in the sample involve a legal dispute between a business and an individual. The Chamber supported the business in all of these cases.
Another 19 cases involved a legal dispute between two businesses. In 16 of these 19 cases, the Chamber supported a Fortune 500 company, foreign multinational, or large American privately held company over a much smaller company. In one of these cases, the Chamber supported British energy giant BP in its litigation against a group of much smaller businesses and individuals harmed by the Deepwater Horizon oil spill. The Chamber argued that these small businesses and individuals should not have been certified as a class for their claims against BP. In another, the Chamber took the side of American Express against a group of small merchants who sued, claiming that American Express abused its monopoly power in the business travel market to charge merchants more than other credit cards. The Chamber argued that these merchants shouldn’t be allowed to sue American Express because they had signed a forced arbitration clause.
In these 292 cases (~60% of the total sample) involving a legal dispute between a business and an individual or between a big company and a small company, the Chamber’s support could be valuable in showing that an unsympathetic corporate litigant enjoyed broad-based support in the business community, including, critically, from small businesses.
While lawsuits pitting individuals against businesses accounted for the largest fraction of Chamber cases, lawsuits between businesses and government also made up a large portion of the sample. The Chamber was involved in 159 cases such cases, including the 25 in which it filed suit. Business versus business disputes, with 19 total cases, were the third most common type of dispute in the sample and individual versus government was the fourth most common litigation posture for a Chamber case to take. The remaining cases involved non-profit organizations or various combinations of government, business, individuals, and organizations on the same side of the case. (Figure 7)
With respect to the governments or government entities opposed by the Chamber, its particular focus on the EPA carried over into the cases in which it filed amicus briefs, as the EPA was targeted an additional 11 times, for a total of 26 cases.
In second place was the NLRB, opposed in 19 cases. The EEOC was opposed in 13 cases and the IRS was opposed in 12 cases. The Chamber opposed a total of 22 separate federal agencies. The Chamber also took on 22 states as well as 23 local government or territorial entities. (Table 5)
IX. The Usual Suspects
Filing a brief or lawsuit every other day is tough work, and the Chamber has found some eager helpers. The USCLC lists only six attorneys and one consultant on its webpage.23 Six attorneys are quite obviously not capable of researching and writing the voluminous number of legal filings the Chamber makes, and so the Chamber has outsourced this work to many of America’s largest and most prestigious law firms.
For the 501 cases in our sample, the Chamber hired 106 different law firms as well as calling on the services of three law schools and/or professors affiliated with these law schools—the University of Georgia, Ohio State University, and Cornell. The law firm most frequently hired to litigate on behalf of the Chamber was Mayer Brown, with 46 cases or almost 10% of the cases in the sample. Shook Hardy & Bacon, with 29 cases, was the second most utilized firm while Jones Day, with 26 cases was third. [Table 6]
Just as the Chamber’s litigation supported a disproportionately large number of very big companies, a disproportionately large number of the Chamber’s hired legal guns came from the very biggest law firms, with 32 of the largest 50 U.S. law firms having litigated on behalf of the Chamber and 44 of the largest 100 having done so. (FN24)
Beyond having outsourced the actual litigation work, the Chamber also frequently litigated in coalition with other groups. The Chamber joined with other groups roughly 60% of the time and litigated alone in just under 40% of cases. [Figure 8]
To better understand the makeup of the Chamber’s litigation coalitions, we looked at the types of groups that joined the Chamber in the 308 cases it litigated in coalition. We found that other trade associations were by far the most frequent litigation partners for the Chamber, having joined it in roughly 80% of the cases it filed in coalition. The next most common partners were industry- funded (FN25) legal advocacy groups such as the American Tort Reform Association, which joined in 29% of the cases it filed in coalition. State Chambers joined in only 16% of coalition cases. [Figure 9]
Other, less frequent litigation coalition partners included professional associations, local chambers of commerce, businesses, think tanks, state governments, minority chambers of commerce, unions, individuals, a foundation, a foreign chamber of commerce, a benefits administration association, and a local government.
So who are these trade associations and legal advocacy groups that frequently partner with the Chamber? A total of 439 different entities joined the Chamber on at least one case. The National Association of Manufactures (NAM) was the Chamber’s most frequent partner, having joined it in a total of 96 cases, or almost 20% of the cases in the sample and fully 30% of the cases in which the Chamber litigated in coalition.
After NAM, the National Federation of Independent Business and its affiliated Small Business Legal Center was the next most faithful partner, having joined the Chamber in 20% of the cases it litigated in Coalition. The Business Roundtable, American Chemistry Council, and American Tort Reform Association rounded out the top 5. [Table 7]
X. Win, Lose, or Draw? The Chamber’s Mixed Record of Success
Of the 501 cases we analyzed, 128 (26%) were still pending. [Figure 10] Of the remaining 373 cases, the Chamber’s position carried the day just over 35% of the time while the Chamber lost slightly less than 30% of cases. In just over 20% of cases, the Chamber argued unsuccessfully that a higher court should accept to hear an appeal of a lower court’s ruling. Most of these cases were appeals on a writ of certiorari before the U.S. Supreme Court. The remaining cases were either settled, resulted in a split decision where the Chamber prevailed on some of its arguments but not on others, or resulted in some other outcome. [Figure 11 — sic — Figure 10 was omitted from the report.]
While having won only 35% of the cases it litigated might at first blush seem like a disappointing outcome, it is important to keep in mind that if you remove cases settled out of court, those disposed of for other reasons, and those where the Chamber urged a court to hear an appeal and instead only analyze those 243 cases decided on a question of law, then the Chamber has won a slim majority (55%).
Is a 55% win rate high or low? Since the vast majority (roughly 90%) of the cases in the sample involved appellate litigation, the relevant comparison point would be the overall success rate of appellate litigation. Academic research shows that success rate on appeal differs significantly depending upon whether the judgment being appealed is for the plaintiffs or the defendants. Judgments for plaintiffs that are appealed are affirmed roughly 60% of the time while judgments for defendants are affirmed over 80% of the time.26
An analysis of the 211 cases in the sample that were appealed from a judgment and resulted in an appellate judgment reveals that in cases where the Chamber argued for affirmance of the lower tribunal’s judgment, its success rate was only average when it supported the plaintiff and significantly below average when it supported the defendant. On the other hand, in cases where the Chamber argued that the lower tribunal’s judgment should be reversed, its success rate was significantly above average, irrespective of whether it supported the plaintiff or the defendant. (FN27)
What to make of these mixed results?
Of course, it is impossible to know what precise part the Chamber’s role played in the outcome of these cases, and it is important to remember that as an amicus in most of these cases, the Chamber gets to pick and choose the cases in which to get involved.
One possible Chamber strategy that might explain these results is that it selectively targets cases where it believes that the lower tribunal ruling may be vulnerable on appeal, and therefore its success rate when arguing for affirmance is lower than average while its success rate when arguing for reversal is higher than average.
It is also worth pointing out that the average affirmance rates calculated by Professor Eisenberg are based on a large sample of over 2 million civil cases in the federal courts, while the sample of Chamber cases includes cases litigated in the state courts, a large number of cases litigated against a government or government agency, and a large number of cases litigated in front of a supreme court. As such, the Chamber sample may bear little resemblance to the much larger sample of civil cases examined by Professor Eisenberg.
The Chamber’s turbo-charged litigation practice is an essential part of its overall strategy to defend the interests of Big Business and thwart government efforts to preserve the environment, safeguard workers’ rights, secure the financial system, and protect consumers. When the Chamber’s vaunted lobbying and election spending operations are unsuccessful at blocking progressive legislation or regulations such as the Dodd-Frank Act or the Clean Power Plan, litigation offers the Chamber an additional opportunity to kill, or at the very least delay, the implementation of such important reforms.
Given the important role that the American courts play in deciding questions of public policy, litigation also offers the Chamber the opportunity to shape public policy in an extraordinarily broad range of domains, often in areas that may not present many opportunities for legislative or executive action. Moreover, because many issues of interest to the Chamber are questions of state law, litigation gives the Chamber the chance to shape public policy at the state level, an opportunity it has clearly seized, having litigated cases in two thirds of the states.
The nature and frequency of the Chamber’s litigation also helps to reveal the true face of the Chamber. While the Chamber’s entire communications strategy is based upon having people believe that it represents the entire American business community and in particular small businesses, its litigation choices suggest otherwise. Its focus on defending forced arbitration, often used by Big Business at the expense of small businesses, restricting unionization, and fighting environmental regulations all suggest an agenda that caters to the interests of large corporations, in particular the Big Banks that have embraced forced arbitration and the fossil fuel industry which detests any and all efforts to limit greenhouse gas emissions.
Even more telling is the fact that in case after case, the Chamber has supported large corporations while almost completely ignoring small businesses who could benefit the most from the expensive legal assistance the Chamber offers. It is rather remarkable that an entity that calls itself the United States Chamber of Commerce has supported foreign multinationals more often than it has supported American small businesses.
Finally, for an organization that loves to decry the insidious role played by civil litigation in the United States, the Chamber’s busy litigation practice suggests that its true view of litigation is that it’s an important tool to be wielded on behalf of Big Business against government, workers, and consumers, and is only to be decried when those same government agencies, workers, and consumers use it to protect their own interests or those of the broader society.
In the second report in this series, Chamber Watch will examine the arguments made by the Chamber in dozens of briefs. We will show that the Chamber doesn’t hesitate to take inconsistent positions from one case to another, nor does it shy away from defending some of the most notorious companies, business practices, and businesspeople of recent times. Stay tuned.
- 1) Influence & Lobbying Top Spenders, 1998 – 2015, Center for Responsive Politics, http://bit.ly/1T4DpdA (viewed on April 21, 2016).
- 2) Outside Spending, by Group, Center for Responsive Politics, http://bit.ly/1NTjCwn (viewed on April 21, 2016).
- 3) U.S. Chamber Institute for Legal Reform Lobbying Summary, Center for Responsive Politics, http://bit.ly/1SK8kip (viewed on April 21, 2016).
4) Recent Court Activity, U.S. Chamber Litigation Center, http://bit.ly/1Omz1FJ (viewed on April 21, 2016).
5) An amicus curiae, or friend of the court, is someone who is not a party to the case but who files a brief arguing for a legal point or points. While in theory, an amicus brief may not support a particular party or parties, in practice, the Chamber’s amicus briefs were almost always filed in support of one or more parties.
6) As of April 18, 2016
7) For the purposes of this report, a small business was defined as a business having fewer than 500 employees. This definition is one of several used by the Small Business Administration. For more information, see, http://1.usa.gov/236lzga.
- 8) As of April 18, 2016. A small number of cases are included in the archives despite the fact that the Chamber did not take a position on them.These cases were excluded from the sample.
- 9) Recent Case Activity, United States Chamber Litigation Center, http://bit.ly/1WpRiIT (viewed May 6, 2016)
- 10) See, e.g., U.S. Chamber of Commerce position on legal reform, http://uscham.com/1VCcjkR.
- 11) During the 37 month period covered by our sample of 501 cases, 363 were resolved. This estimate actually underestimates the frequency with which the Chamber files cases or briefs because the Chamber filed multiple briefs for a non-trivial number of cases in the sample.
12) Sean Higgins, Comrades in Arms, WASHINGTON EXAMINER (May 18, 2015) http://washex.am/1c1e4Db.
- 13) See, e.g., About the U.S. Chamber, U.S. Chamber of Commerce, http://uscham.com/1N7Jz0s (viewed on April 29, 2016) and Statement of the U.S. Chamber of Commerce on Assessing the Effects of Consumer Finance Regulations, U.S. Chamber of Commerce, http://1.usa.gov/1N5n1b2 (viewed on April 29, 2016).
- 14) For a detailed analysis of the Chamber’s preferred communications strategy of using small businesses to advocate for policies that benefit Big Business, see BARTLETT NAYLOR & DANIEL DUDIS, PUBLIC CITIZEN, SACRIFICING THE PAWNS (June 2016), http://bit.ly/28N1dnh (viewed on June 22, 2016).
15) For the purposes of this report, a small business was defined as a business having fewer than 500 employees. This definition is one of several used by the Small Business Administration. For more information, see, http://1.usa.gov/236lzga.
16) The threshold for making the Fortune 500 in 2015 was $5.2 billion in revenues. See, Fortune 500 No. 500, McGraw Hill Financial, http://for.tn/1W49f1t (viewed May 2, 2016)
17) Frequently Asked Questions, Small Business Administration Office of Advocacy, http://1.usa.gov/1DwAMOY (viewed May 2, 2016).
18) See, e.g., Above the Fold – Restoring Regulatory Sanity, U.S. Chamber of Commerce, http://uscham.com/1Uhi327.
19) The California Legal Remedies Act, §1750 et seq California Civil Code, http://bit.ly/1Xd54zm, prohibits forced arbitration if it would be unconscionable. It also contains a provision favorable to class actions.
20) Standing usually requires that the plaintiff show that it has suffered or will suffer some sort of direct harm from the action it seeks to challenge. For more information on this legal doctrine, see, e.g., http://bit.ly/26uRpYq.
- 21) See, e.g., U.S. Chamber seeks regulatory certainty, resource access, U.S. Chamber of Commerce Institute for 21st Century Energy, http://bit.ly/28O8WmX (viewed June 22, 2016)
22) While the Chamber, as a 501(c)(6) trade association does not have to reveal its donors, a previous Chamber Watch investigation revealed that more than half of the Chamber’s annual budget came from just 64 donors. See, SAM JEWELER, PUBLIC CITIZEN, THE GILDED CHAMBER, at 3 (February 2014), http://bit.ly/1QBfcdA.
23) U.S. Chamber Litigation Center, http://bit.ly/21hKFJz (viewed on April 27, 2016).
- 24) Law firms ranked by 2014 gross revenue. See, the 2015 AmLaw 100, THE AMERICAN LAWYER, http://bit.ly/1OfrJZO
25) Fact Sheet: American Tort Reform Association, Center for Justice & Democracy at New York Law School, http://bit.ly/1rlGnnX (viewed on April 28, 2016).
26) Theodore Eisenberg, Appeal Rates and Outcomes in Tried and Nontried Cases: Further Exploration of Anti- Plaintiff Appellate Outcomes, 1 JOURNAL OF EMPIRICAL LEGAL STUDIES, 659 – 658, 671 (2004), http://bit.ly/1q15Q4M.
27) Of these 211 cases, the lower tribunal found for the plaintiff in 109 cases and for the defendant in 102 cases. Of the 109 cases appealed from a ruling for the plaintiff, the Chamber supported the plaintiff 18 times and won 11 of those cases for a 61% affirmance rate. In the other 91 cases appealed from a ruling for the plaintiff, the defendant supported by the Chamber won 62% of the time, which translates to a 38% affirmance rate for the plaintiff, significantly below the 60% average. Of the 102 cases in which the lower court ruled for the defendant, the Chamber supported the defendant in 72 of those cases. 51% of those judgments for the defendant were affirmed. In the remaining 30 cases where the Chamber was the plaintiff or supported the plaintiff (the defendants in these cases were almost all governments or government agencies), the Chamber won 60%, which translates to a 40% affirmance rate for the defendant
There are two subsidies that are universal to the American style of development.
The poor neighborhoods are subsidizing the affluent neighborhoods. That is a universal truth of American development.
Future generations are subsidizing today’s generation.
Chuck Marohn: There’s a reason why our ancestors, and I say that in the largest possible sense of the word, why our ancestors built in this way. These are micro shots of a city, but when we step back to the macro and look, we see the same basic trends. What I’m going to show you right now is some brilliant 3D modeling done by a friend of mine named Joe Minicozzi.
If you think of a farmer going out and spreading seed in a field, the parts that grow up the most robustly, we call those the most productive parts of the field. What I’m going to show you in the vertical now, is value per acre. Where is the most financially productive parts of a city. I’m going to start with Buffalo, New York.
Because Buffalo, New York, has been hollowed out in this new experimental way to build. After World War II, people started to leave Buffalo. It has lost population every census since 1940, there’s been a continual downward trajectory. They ripped down so many buildings to put in parking ramps and parking lots.
It is a tragedy what has happened to downtown Buffalo. Yet, when we step back, and we look and say, “Where is the most productive land use patterns in the city of Buffalo?” can you point to where that traditional downtown is?
Not only is it still, despite 70 years of decline, this massive repository for wealth, but it absolutely dwarfs everything around it. We can go to cities that are much smaller. This one is one of about 60,000 in upstate New York. We see the same general trend.
We can go to cities that are very, very small. This is one of 1,200 near where I live. When I first went to this city they said, “Chuck, we’ve got some great stuff going on out here, we’ve got some great stuff going on out here, but these neighborhoods here are terrible.”
Joe and I did a study. Joe’s team and I did a study, in Lafayette, Louisiana. Where we not only looked at the revenue being produced but we actually looked at the expenses for each property in the city. We dug through all the city records, we pulled everything, where are you spending money, how do we allocate that by parcel, where is your revenue coming from, and where is that allocated?
At the end of the day, we printed this map. I realize, statistically, there are people in this room who are red‑green color blind, and I apologize to you because this map makes less sense to you than to others. I will walk you through this.
[Looks over shoulder at screen] No, I won’t, because my pointer is also green. [Audience laughter.] I think you can probably see the difference, though, so I’ll try this.
Every place where you see green is a place where the city is bringing in more money than they’re spending. Every place where you see red is where the city is spending more money than they are bringing in.
Let me show you what is going on in this map. There is a spike rate here. That is a green spike. That is a development called River Ranch. It is a new urbanist development. By new urbanist, in the context of our conversation tonight, what I’m trying to say is, that it is a development built with traditional development style, with modern financing. Tight streets, tight neighborhoods, but everything is built all at once to a finished state.
It is still unclear whether 25 years from now, when everybody’s roof fails at the same time, everybody’s driveway fails at the same time, everybody’s appliances go bad within 5 years of each other, whether this neighborhood will have the stickiness to renew itself. But, right now it’s absolutely killing it, it’s the most profitable place in the entire city.
Just to the east of that is a big green area right here that is their core downtown. Now, Lafayette is a great place, they are really trying hard, but their core downtown reflects, kind of, the college nature of their town. Dive bars, a couple of restaurants where you can get tacos for two bucks. They’re struggling. They would kill to have a block of the excellence that you have here. It is a marginal place. Yet, financially it is weighing in really heavy. It pulls in a lot of green. It is very cash flow positive.
There’s a crescent of green that runs through here. That crescent of green is the poorest neighborhoods in the city. When we were going there, and we’re getting an Airbnb to do our work, our research, the city staff told us, “Don’t go to those neighborhoods.” That’s where the burglaries happen, the homicides happen. That’s the bad part of town.
All the rest of this is red. When we look at this red, what do we see? Out here you have the malls, the big‑box stores, the strip malls, the drive‑ through restaurants. You have the sub‑divisions with the cul‑de‑sacs, and the three‑car garages. We have all the stuff we built the last 20, 30 years.
There are two subsidies represented in this map. There are two subsidies that are universal to the American style of development. Subsidy number one. The poor neighborhoods are subsidizing the affluent neighborhoods. That is a universal truth of American development.
Subsidy number two. Future generations are subsidizing today’s generation. The city of Lafayette today has a $45 million backlog of road maintenance. They add millions to that every year. Their budget to keep up is something like a million. If they double, triple their budget they’re never going to catch up.
The typical family in Lafayette pays $1,500 a year in taxes to the city. In order to make good on every promise represented in this map, taxes would need to go from $1,500 a year to $9,200 a year. That will never happen.
What you’re looking at here is a future for Lafayette where they’re going to have to make difficult decisions. They’re going to have to decide what road they don’t maintain. What pipes they don’t fix. What part of town they let go.
We’ve seen this before. You guys have heard of Detroit. Everybody has a narrative for Detroit. If you’re on the right side of the political spectrum, you have a narrative for Detroit. If you’re on the left side, you have a narrative for Detroit.
I’ll tell you my narrative for Detroit. Detroit got started in this experiment before everybody else. They did it more aggressively. They arrived at a logical destination, ahead of everybody else. They have been undergoing a decade or two of contraction, of trying to figure out how to keep everything going until they couldn’t anymore.
Now they are dealing with the consequences of that. That is not an anomaly of America. That is the way we had built all of our cities. When we step back, and we look at what these places look like, it gives us a sense of what we can start doing now to make things better.
These are from analysis we did in North Carolina, where we see the Kmart site, coming in at 384,000 an acre of financial productivity. The Walmart at 967,000 an acre of financial productivity. These were sites they were very proud of. The city had spent millions running sewer and water out, building an interchange, subsidizing these places.
Yet, when we go to the court downtown we see an old warehouse turned into a supper club that’s now five million an acre. My favorite place of all time, Jimmy’s Pizza, 3.4 million an acre.
Now, let me ask you this.
Do you, the people of Salem, when you step back and look at your cities, if you experience your city at 2 miles an hour, instead of 45 miles an hour, and you realize how much space is between everything, how huge the gaps are, how much underutilized pipe and street and sidewalk we actually have here, do you have the wherewithal, the sophistication to build something as exquisite as Jimmy’s Pizza?
If you do, and I believe you do, if you can raise yourself to that bar of sophistication, you can start to build tremendous amounts of wealth within your community. Not only are you building tremendous amounts of wealth, but we all understand the profit implications of this style of development versus this style of development.
Jimmy’s kids go to school with our kids. He goes to church at our church. He buys his supplies from people locally. He advertises in the local paper. He banks at the local bank. This has huge implications for who we are.
There’s one last concept here I want to share with you, and it really goes to the core of who we are. This is an adage from Silicon Valley. “Innovation that happens from the top‑down tends to be orderly, but dumb. While, innovation that happens from the bottom‑up tends to be chaotic, but smart.”
We all prefer if we were to pull people, smart to dumb. As affluent Americans, we have a really, really strong preference for order over chaos. We will tolerate a lot of dumb in order to have order. If you doubt me, think of the last time you sat at a traffic signal at one in the morning.
Let me show you what this looks like at a city. This is Memphis, Tennessee. Memphis, Tennessee is a fantastic city. I’ve been fortunate enough to be able to work with Memphis on a number of things, but Memphis shows up often on all those statistics you don’t want to be on. They’re often one in two with Detroit. Poverty rate, homicide rate, out‑of‑wedlock births. You see, Memphis and Detroit shift one‑two‑two‑one. Memphis, though, has done everything they were supposed to do to create growth and prosperity.
After World War II, they ran the highways through the middle of the city. They ripped down buildings to make that happen. They ripped down buildings to put in parking ramps. They extended sewer and water and grew outward. They eventually built a beltway around the city.
They put in bridges over the Mississippi because that would create growth on the other side. The idea was, “We’ll keep inducing more and more growth by our big construction spending projects.” They eventually built out so far, they built a second beltway. They subsidized businesses to move into Memphis. They subsidized businesses to stay in Memphis.
At one point, they decided is what they needed is a huge public works project that would help them land an NBA basketball team. They went and built a pyramid‑shaped stadium down on the river, and went looking for a team. They were eventually able to find a team.
Those of you that are not into basketball, Memphis was able to get the Vancouver Grizzlies to leave Vancouver and move to Memphis. The problem was when the Grizzlies came to town, they didn’t like the stadium.
The city wound up building a new stadium a few blocks away from here. This one sat empty for 15 years. After a couple of hundred millions of dollars of tax subsidy from the state and the local government, they were able to transform this into a Bass Pro Shop.
Orderly, but dumb. Let me show you chaotic, but smart.
This is also in Memphis, Tennessee. Memphis, Tennessee.
This is a little street called Broad Avenue. Broad Avenue used to be a streetcar stop. When the city went through and put the highways through the neighborhood, they ripped the streetcar out. Without the foot traffic, without the streetcar stop, these blocks just died.
Some residents fed up with the decline, fed up with the neglect, went and took matters into their own hands. They went out and work with the storefront owners to get them swept out. They swept up the sidewalks. They went out and painted their own bike lanes. They painted their own crosswalks.
They invited, for one weekend, businesses to come in and open up and just show people what this could look like. They had a ice cream stand, a couple art galleries, a bike shop, a clothier. They didn’t go get city permission. They didn’t get go get department of health inspections.
They said, “By the time anybody gets angry at us, we’re going to be gone anyway. So, let’s just do this.”
It actually made the street kind of a nice place. This isn’t the greatest street in Memphis, but it’s a heck of a lot better than what was there before they started.
I wasn’t here for this project, but I was out there six months later. They brought me out. When I was out there six months later, every single storefront was occupied by a business. I talked to one of the owners of the buildings. He said he was able to charge twice the amount of rent for the last place to go than what they were asking before the project started.
The city has since gone out and documented 18 new businesses, 32 new jobs, $12 million of property value appreciation in the neighborhood.
Total public investment, zero.
That is chaotic but smart.
Now, I don’t know what your city would do if you guys went out and started painting crosswalks.
I can tell you what my city would do. We have no tolerance for that type of chaos. The Monday morning, you would have the city engineer and the city attorney out there. The city engineer would have the manual on uniform traffic control devices. They’d be saying, “That doesn’t meet our standard for a crosswalk.”
The attorney would say, “Well, then, we have some potential liability. Get the power washers out here and get rid of this.” Then they would send the police chief over to my office to give me a ticket. We would have no tolerance for this.
In Memphis, though, they’re very smart. They’re very smart. Their desperation has made them very smart.
What did Memphis do? They went out with power washers and got rid of this. Only after they had a plan to put it back permanently.
You see, what the city of Memphis understands, is that they could have all the public hearings, all the commission meetings, all the special tasks forces, all the surveys, all the sticker charts on the wall they wanted, and they never would have identified this as a high return investment.
But their people did. Because their people did, their job now is to never let it go backward.
The city of Memphis is really smart. Really, really smart. Here’s what else they did. They were actually redoing that highway, right behind this places. When they were doing that, you know what they said?
They said, “Wow, there’s stuff going on in this neighborhood. Let’s stop this highway plan, and let’s actually take this couple blocks here, and change the cross‑section to see if we can add some more love to what’s going on here, and get people to be able to flow more easily across the street.
“We’re not going to spend $5 million on pedestrian ramps and tunnels. We’re not going to completely redesign it. We’re just going to tweak this in a small way so that we can try to nudge this thing along a little bit more.”
They had a bikeway that was going in, that was funded by a federal grant. It was six blocks away. They said, “Wow, there’s great stuff going on in this neighborhood. We would be fools if we didn’t leverage that with another little nudge.” They rerouted that bike lane that they were putting in to run right through this neighborhood.
The city of Memphis is smart. Their desperation has made them smart. They’ve realized that the people and their city are showing them the way. We were so inspired by what was Memphis did, that in my hometown, we started a group called A Better Brainerd.
We went out in that block with the Taco Johns and the old and blighted block. We went out in that neighborhood, and we spent a year observing where people struggled and trying to find ways to address those struggles.
We saw the kids walking through the alley. “Why are you walking through the alley on the way to school? Our mom said it’s not safe to walk on the streets, so walk back here.”
We saw the mom walking with a stroller through the ditch. “What are you doing?”
“Well, I have to get to the grocery store to get milk. I don’t have a car today. It doesn’t feel safe walking down the street so I’m walking here.”
We saw the elderly woman walking with a walker in the middle of the street climbing over mounds of snow. “What are you doing?” “Well, I have to get to the pharmacy today. I don’t have another option. The sidewalk is not shoveled so I have to walk here.”
We went out and we tried different things to see how people would react and if it made life a little bit better. After a year of working in this neighborhood, we came up with a report called Neighborhoods First. It detailed eight projects the city could do to make people’s lives a little bit better.
Under the idea that if we showed the neighborhood some love if we made it a little bit better place to be, that people might actually want to live there. They might actually want to stay there. They might actually want to invest and make their properties better.
Little things like, put in a crosswalk here, put in a bike lane here. Plant a row of trees.
My city right now is in the process of spending $14 million to run sewer and water two miles out of town to build a business park out at the airport. We already have a business park we built in the ’90s that’s only half‑full, but this one is air‑oriented, and we’ve convinced ourselves that that has some type of magic cachet that’s going to create jobs, and growth, and spin off in wealth for everybody.
The total cost of our eight projects? $16,700.
What happens if we go out into this neighborhood and spend $16,700 making small, little improvements to try to make things better, and nothing is better?
Well, we’ve lost $16,700, and we’ve learned eight things that don’t work. Go and try eight more things next year. But, I think they’re going to work. I actually went to the city engineer and said, “I think you could use a sidewalk here.” [Pointing to grass worn by people walking in slide above.]
Do you know what his response was? “Why would you say that, Chuck?”
We will never find the high return investments in our communities the way we do things today. We will never identify the high return investments the way we do things today, with public hearings, and commissions, and charts, and top‑down funding.
The way we will identify the things that our communities need to become strong and successful, is to actually humble ourselves to go out and to look at where people struggle, and then ask a very simple question. What is the next smallest thing I can do right now to address that struggle?
If we can do that, day after day, week after week, year after year, if we can humble ourselves in that way, not only will we be making the highest returning investments that we can possibly make in our communities, we cannot help but improve people’s lives in the process. Thank you so much.
Audience Member: Can you explain more about poor neighborhoods subsidize richer ones? Is that what you were saying? Can you explain that a little more?
Chuck Marohn: Yeah. The tax generated through poor neighborhoods exceeds the amount of expense we spend in those neighborhoods, and that excess cash goes to other places, where we are spending far more than what we bring in.
Audience Member: [Because the poor neighborhood has] been around longer…?
Chuck Marohn: No, no, because they were built . . . The reality is that those places were largely built on principles that are really financially potent and resilient.
It’s a quirk of fate, and I said it’s a universal trait, the American development pattern. We can go to oddities in the system, such as San Francisco, Vancouver, New York, which are oddities in the system, where wealthy people actually live in those places. But for the vast majority of US cities, including this one, the poor people live in the poor neighborhoods. Those are the older places, the tighter places and those places generate more revenue per acre and have lower overall expenses than the stuff that we build brand new today.
Audience Member: Do you think there is a relationship between the poor returns on the new type of building and their general ugliness?
Chuck Marohn: From our vantage point, I think no, initially, but yes over the very long term. I’ll answer that this way.
Classical development styles — I’m not an architect, I’m not going to pretend I’m an architecture snob, this is not my field of expertise.
But, when we step back and look at architectural styles that descend from the Greco‑Roman, in the West, the Greco‑Roman kind of approach, where you have certain ratios, certain amounts of symmetry. The ways you front the street, and interact, and address the public realm. These things were all just inherent in the development style of the pre‑Depression type because they were built in scale to people who walked. You didn’t want to have a 50‑foot blank wall with nothing. You would have windows and interaction.
Yes, those timeless forms of building retain their value better than the stuff we build today, which is very random, chaotic, fake. It has a very different, kind of, longevity to it. I couldn’t give you detailed architectural explanations, but there are people, Will is one who’s a brilliant guy on this, very much could and would make that argument very strongly.
Audience Member: The reality — until we have the Big One after all of our houses are wrecked — is that we do mostly live in the suburbs and outside of downtown. But, how can we, with the existing zoning laws, or changing the zoning laws, how can we create more small villages within the cities in the suburban kind of streets and areas?
Chuck Marohn: That’s a great question. I will set up a straw man that I can beat up because it’s a straw man you all will recognize.
I think planners have this [idea] — The next fetish we have is with node style of development that is incredibly intense. Sometimes we call it transit‑oriented development, or we call it high density.
The idea is that you pick a place, and the planners know where this place is because they’re smarter than all of you, they’ll pick that place and then they’ll say that place should have very high density.
A lot of times that conversation is, where can we put those people so that they won’t be near me? I think that that is destined to fail, and we can talk about why I think it’s failing miserably in Portland, and really leading to Portland’s unaffordable housing problem. The problem they’re trying to correct, they’re actually causing with their policies.
We could talk about that, but I think that for your situation here, a far better strategy is to say, every neighborhood should have the opportunity, by right, to build the next increment of intensity.
In other words, if you live in a neighborhood of single family homes, you should be able to, by right, show up to City Hall at 9:00 AM and by noon, walk out with a permit that would allow you to build an accessory structure, an apartment on your lot, or convert your home, through addition or whatever means, into a duplex.
If we do that for a generation, what you will see is that your places will not alter that much, they will not change that much. You will be living the style of life that you have now chosen, but you will be doing it in a thicker rug with essentially a lot more wealth.
What will happen over time, and we can actually see this going on in places like Detroit and Memphis where they’ve gone through the down, is that some neighborhoods react to that very robustly. Bam, they start to build.
Then, what happens when you get that duplex, then you can incrementally grow to the next level. You’re a neighborhood now of duplexes, why don’t you become a neighborhood of quad units?
What we see is it starts that incremental progression up. It never distorts property values by having huge jumps. It stays within itself and grows incrementally. What you’ll see is that neighborhoods and villages start to coalesce out of that.
We need to, in general, stop thinking of commercial as a separate entity than residential.
In the early 1900s, planners scored this massive victory when they separated smelting plants from apartments. Since then, we’ve had this obsession with separating everything from everything.
The reality is we do not have smelting plants anymore, and it’s very easy to take noxious things and put them out in the middle of the nowhere. What we’ve said now, is that I can’t have a business with a delivery across the street from me. OK, no. We actually have to allow [that].
We should be obsessive about the form of our building, how a building addresses its neighbors in a respectful way. We should not be obsessive about the uses going on in that building, the way we are today. Planners call that mixed‑use. I hate the way they implement it. I just call it development. We should just embrace city development.
Audience Member: I’m curious about either before or after someone in a city heard you speak, if anyone had done a real estate assessment of their long‑term financial obligation and said, “Wow, we’ve got to stop the madness.” What strategies did they use?
Chuck Marohn: Yeah, yeah. It’s funny because I spent many years in the wilderness talking about this stuff, and especially back home, I had this one critic that would follow me around and her question was, “OK, Chuck, where is the city that’s done what you said?”
It was like trying to invalidate me, I know you’re not doing that, but it’s very frustrating because nobody does this. Nobody does any simple return on investment calculation. We’re building a new $500 million bridge, how much does our tax pays need to go up to pay for that replacement and repair that bridge in the future.
That is actually … That is actually a fairly simple calculation, and if you do that calculation what you find is that the number you get is astronomically greater than anything you could ever conceive.
Yes, I’ve seen cities start to do that. Early on we saw cities killing bad projects because that’s the easiest thing to do is to say, we’re not going to do dumb things anymore.
[The] harder thing to do is to revamp your system of delivery, and we a lot of cities now, Memphis is a great example having changed their staff, there is project delivery process. They still struggle sometimes because we’re all human, but they’re doing a lot more small innovative things.
We see cities all over and a lot of them are inspired by our work, but they’re also inspired by a lot of other stuff, the Tactical Urbanism, the Better Block people, because we’re doing brilliant work with the high investment projects, so going out and trying to do little things with paint and straw bales and bollards to make places work.
Probably the principal place that we’ve seen like, the complete city lobotomy is a little place called Hays, Kansas, population 25,000. They drank the [Strong Towns] Kool‑Aid before I ever met them. They called me up one day and said, “We’d like to share the stuff we’ve done because of the work you’re doing.” They sent me all these reports about how they had redone their entire budget process, their entire capital improvements planning process and it just blew my mind, because it took these principles and applied them in a brilliant way.
I think we need more cities [like that], I’m standing up here tonight saying I have identified a problem, I have some philosophies about what a solution should feel like, but I’m not going to stand here and pretend that I know how Portland should it, how Dallas should do it, how Brainerd should do it – I do think I know how Brainerd should do it.
We’re all culturally different and I think we’re all going to figure this out in a different way.
Audience Member: Do you in your opinion think that states and the cities that are all giving away tax breaks for large corporations to get them to come into our cities and towns are part of the problem?
Chuck Marohn: The very short answer is yes.
I think a slightly longer more complicated answer, there [was] certainly basis for the notion of them doing that. If you go back 40 years that was an economic development strategy that worked. Today, it no longer is. The pull, the ability to pay a business to move is one that has long past.
What happens is that you have business that is looking to move and they’ll find three or four places that are acceptable and they will say how much will you pay me versus how much will you pay me, right? We have a name for paying someone to pretend they love you.
That’s not a sound economic strategy.
What we find is that the cities that are actually most successful in today’s competitive marketplace are cities that actually have great people. Because the type of businesses that you’re trying to attract by paying them money, they’re number one commodity that they’re short of is a great workforce.
This why you can see even in a high tax states — and I’m not a high tax advocate guy, but you can see, even in high tax states, where you have high‑quality workforces, they attract businesses, and low tax states with low‑quality workforces do not.
Really, our business development strategy has to change from being one of trying to pay businesses to pretend they love us to one of building up our cultural presence so that great people move here, stay here, live here, invest here and find our community to be a successful place.
If you’re very interested in economic development, there is a thing that the Lowe Foundation has taken from Littleton, Colorado called Economic Gardening. Economic Gardening is the –just go read about it.
It is the brilliant way that cities today are creating lots of high paying, high capacity jobs with absolutely no subsidies, just by tapping into phase two businesses and their rapid growth characteristics and by assisting these magic CEOs that know how to create jobs by assisting them with the things that they generally struggle with.
A CEO of a fast growing stage two company doesn’t need money. They need to know who are my competitors, what are my competitors charging, where is the market for my product? These are things that these people don’t intuitively know because they’re not business people, they’re inventors, they are idea people.
Economic Gardening is a program that started at Littleton, Colorado, that the Lowe Foundation has now funded on a national basis to try to help cities do — as shown over and over again — with pennies on the dollar, produces lots of high‑quality jobs.
(Elected official) Audience Member: I wonder if you can comment a little more about the wisdom or folly of spending money on building new infrastructure and roads and bridges, but we cannot maintain roads and bridges and infrastructure that we have right now.
Chuck Marohn: Only an insane people would think that it’s smart to build more when you can’t fix what you have.
The Department of Transportation head for Tennessee, when he was named went to the legislature in Tennessee. Schroer is his last name, I can’t remember his first name, brilliant guy.
He went to the legislature and said, “Look, we have a house with a leaking roof, you want me to put on an addition, I’m not going to build any addition until we fix the roof, period.” Is that common sense or what?
Here is the way cities operate [today]: imagine and think about that map of Lafayette, we had the green areas and the red areas.
A city today is like a company that has five divisions and the one division is profitable and the four divisions are losing money, and our solution to that problem is to build a fifth division that looks like the four that are losing money.
That makes no sense at all.
To me, I think the solution is to make sure that the first division never fails.
Your good neighborhoods should never suffer from lack of maintenance.
Your downtown should always have sidewalks that are fixed, should always have streets that are properly maintained, should always have lights that are on, should always be taken care of, because it’s producing huge amounts of wealth for you.
Then in the neighborhoods surrounding that, maybe [they] are cash flow positive, maybe are not but are on the borderline, those places should be getting the excess, the wealth being generated [in the downtown], they should be getting the love and brought back up, because that’s the division that can actually be made profitable with a little bit of tenderness.
The other ones are the places where you’re going to have some difficult triage questions, but you are fools, we are fools, I will put myself in this American pool of people. We are fools if we build more.
Do you want to know how big a fools we are?
Audience: Yes. [laughter]
Chuck Marohn: Detroit, which is undergoing massive contraction.
They are letting go of whole neighborhoods.
They’re letting go of pipes. They are digging up roads but building more stuff too.
It is so ingrained in who we are and what we become. It so ingrained in our processes and the way we envision ourselves.
Think of like the Romans with the Gauls coming in saying, “We can still have that circus,” and it took a while for them to come to grips with the world have changed. We can be smarter than that.
I don’t want to rail on your bridge project. I’m not here to fight about a bridge, but to me, the idea of building even a frontage road to a potential bridge is a bizarre concept when you have so much stuff that you cannot afford to maintain today.
You’re actually going to have to make really, really difficult painful triage decisions in the future about the stuff that you’ve already built, why would you make that problem way, way, way worse?
Audience Member: We have [many people who work at] these [places] like Walmart, and Macy’s, and Target and all of that. How can they become part of the solution?
Chuck Marohn: How can they become part of the solution, the rational response to this set of problems?
OK. Here is the thing, I have people all the time who used to call me and say, “We’re getting a new Walmart. Will you come and help us defeat this Walmart?” and I say, “No, I’m not anti‑Walmart. You might want me to be but I’m not.”
I don’t look at Walmart as part of the problem.
I look at Walmart as the natural outcome of the development pattern we have chosen.
If you don’t like Walmart and what it represents and who it is, you should not like the thing that birthed it, the thing that created it, this development pattern we have.
We see today companies like Walmart and McDonalds incredibly savvy. Costco, Home Depot, they’re seeing how cities are changing, how actually, demographically we’re seeing an inversion in our cities and growth in the suburbs has slowed and actually in many places reversed itself and growth in our central cities is taking off.
What you see is that Walmart has come up with neighborhood Walmart and McDonalds has come up with neighborhood McDonalds, and they’re scaled differently, and they’re designed differently. I don’t know if that’s the future or not. It might be, it might not be.
I’m agnostic about Walmart in that sense because, at the end of the day, if Walmart goes away, will we not have toothpaste, will we not have paper towels, we’ll we not have cheap imported plastic things? No, we will likely still have those they will just be delivered in a different way.
To me the form, the pattern of development, does it work for us, is it financially solvent, is a way bigger question than what company actually occupies that store front to deliver the goods and services that we are willing to pay for.
I know we’re getting like, we have to have people all the way out of here in nine minutes. [laughs] One more…
Emcee: We’ll take one more short one.
Audience Member: [We have a lot of cities with smaller towns around them.] How do the smaller communities [respond to this problem]?
Chuck Marohn: You’re going to end with a weeper.
We are in the process of wiping out the majority of our small towns.
Maybe 80 percent of our small towns will no longer — I don’t think will exist 20 years from now.
They’re largely propped up with massive subsidies and they exist today not because there is an economic resource to be exploited or some unique things to them that we cannot exist without them, but they exist because of a lifestyle choice of the people who want to live there.
That’s painful because I live in a small town, I come from a small town, but I look around, the people around me and they have chosen to live there because they like small town life, not because it’s essential that whatever they do be here.
The thing that small towns can do…this is going to sound terrible. I feel like I need an hour to just talk about small towns, but in many cases small towns have this symbiotic relationship with major cities.
Small town existed in this country not because people love small town life, but because there is actually an economic need to live there generated by the big city, there was this back and forth.
We need food so we need people out here who can help the farmers buy processed things and put their tractors together and their plows together and all that, we have to have that because we needed the food.
Now, we don’t need them out there to have the food because we have these huge machines and they are serviced by a truck driving by. It’s a very different model so the people that are there live there because they like it but not because they have to be there. If you are in a small town and you want to be around, I’m not talking about being prosperous, you just want to be around a generation from now, you need to find a way to be useful to the people around you.
You need to start doing what in economics term is called import replacement. How do we stop exporting capital out of our communities and start producing things for ourselves here?
You can start with food, it’s the easiest thing to do.
You can then start with gasoline. You can actually bike instead of drive everywhere. Small towns are small enough to walk the whole thing. You don’t have to have a car to go to two blocks that you’re driving it today, that’s money that you’re not sending out of the community that you’re going to actually spend here.
These are little tiny things that are beneath us as Americans in so many ways, but the towns that can do them will be the ones that stick around, and the towns that don’t will be the ones that have no purpose to live when the tide goes out and the subsidies are no longer there.
That is a really depressing requiem on small towns, but I still live in one, and I love it and I will be sad when there aren’t as many, but I think that that is the economic reality, there is no reason for a lot of these places to exist, and therefore when the subsidies go away they won’t. On that happy note…
One last thing, StrongTowns.org is our website. We publish stuff there all the time. It’s all there free for you to use. It’s Creative Commons licensed, you can take it, erase my name put your name on it and send it to the newspaper, and that’s perfectly legal and fine.
We’re a member‑driven organization, if you like what we’re doing we ask that you share it with others. If you really like what we’re doing, go to our website and sign up to become a member. Thank you everybody.
“Why, despite the growth, and the jobs, and the programs, and the incentives, and all the things we do to generate wealth and prosperity, don’t we have the money to do just basic things?”
Emcee: [Mayor-elect] Chuck Bennett will be in a strong position to look at projects and proposals with a Strong Towns perspective, so I thought it would be great if I could make sure Chuck could come, so I said, “Chuck, why don’t you introduce Chuck Marohn?”
Salem City Council Member Chuck Bennett: So that’s what the concept was. I wondered. I’m really honored to be here and being asked to introduce Mr. Marohn. This is a great opportunity for our community. Chuck Marohn is a licensed civil engineer, a member of the American Institute of Certified Planners, and holds a master’s in Urban and Regional Planning from the University of Minnesota’s Humphrey Institute.
He’s an author, he’s a broadcaster, and he founded and serves as president of Strong Towns, a nonprofit organization based in Minnesota. Chuck’s passion is working with cities and towns on issues of economic development, land use, and engineering.
Chuck says that America’s post‑World War II approach to growth has transformed cities rich in history, ingenuity, and character, into places that are financially fragile, and socially frayed. Chuck works to resolve the greatness of our cities and towns by reconnecting these places with their historical development pattern.
He focuses on bringing back the basic principles of financial resiliency, and the importance of community in the measure of prosperity. I know we’re in for a challenging and thought‑provoking evening. With that, I hope you’ll join me in welcoming Chuck Marohn to Salem. Thank you.
Chuck Marohn: [laughs] We were sharing first name stories, horror stories before. Thank you so much, and it’s very nice to be here. I appreciate, not only the welcome but the turnout, and just a great day today. I’ve spent the day kind of immersed in your city, and it’s been a delightful experience.
We like to talk about Minnesota as being Minnesota nice, a very nice place. To me, Oregon and in the three days that I’ve been here has been Minnesota with a little bit more topography. Very nice, I appreciate the warmness.
I’m a civil engineer and I worked for many years doing standard engineering projects for cities. Roads, and streets, sewer water, even worked on an airport project once. I became, I don’t want to say disillusioned because I think that dramatizes things.
I wasn’t disillusioned as much as I thought I was, maybe, not a very good engineer. A lot of the questions I had about the profession, a lot of the things that I was doing that didn’t make a lot of sense to me. A lot of things that I was doing that didn’t make much sense to me, I thought I could resolve by going back to graduate school and getting a degree in planning. Planning and engineering seemed like very related fields. They’re actually quite different, sadly so.
In engineering school, we made jokes about planners. In planning school, we made jokes about engineers. They were both equally funny in their own way. I thought if I got a planning degree, I could get out in front of a lot of the projects that I was doing that as an engineer didn’t make a lot of sense.
My idea was, “I will become a planner who gets engineering and won’t screw thing up for engineers to solve.” As I worked for a number of years as a planner, I found myself in the very same situation, doing the same things that I had kind of resolved that I wasn’t going to do. And my questions just continued to grow, and grow, and grow.
Finally, as we went through this crazy year of 2008 when banks were failing and gas prices were soaring, and we had this insane election, which now looks very quaint in comparison . . . [laughter] . . . but at the time felt like lunacy to me, I sat down and started to write. Just like exercise, you have to stick to it.
I said writing is like exercise, I’m going to write three days a week. I’m going to write about the things that I see, and the things that I see going on, as a way to figure them out in my own brain.
I was focused on one central question, why are our cities struggling financially?
Why, despite the growth, and the jobs, and the programs, and the incentives, and all the things we do to generate wealth and prosperity, don’t we have the money to do just basic things?
Why can’t we keep a library open past 4:30? Why can’t we put a crosswalk in? Why can’t we keep police officers and firefighters employed? Why can we find millions of dollars to run a secondary bypass around the south side of the city? But we can’t find the money to mow the park. Why? Why is this?
I started to write, really for myself, and a few of my close colleagues. It transformed, kind of, my life. Things took off in ways that I never anticipated. A year later, some friends of mine prompted me and actually filled out the paperwork to start a non‑profit. A year later, we had a 501(c)(3).
A few months after that, a foundation contacted me and said, “Chuck, would you come and explain to us what you’re doing? We find your stuff interesting, we know you are a 501(c)(3). We are a foundation, would you come, and just explain to us what you do?” I said, “I have no idea what I do.” [laughter] “I’m just writing.”
I went up there and I gave them the very first curbside check presentation. The very first rendition of the presentation that we are going to look at tonight. We got done with that and they said, “This is a really important message and we want you to share this message with as many places as possible.”
The Blandin Foundation gave me three years of start‑up money to go out, and figure out how best to share this message with as many people as we could. I started out talking to groups of two and three. I drive six hours once, and two people showed up. Did a lot of that. Over time, things just kind of went crazy on us.
We now, Strong Towns is a national movement of people. We have a few short of 1,500 members. We have almost a million unique readers in the last month of our online content. We are trying to create a movement of a million people who care about this message of change enough to actually share it with someone else.
Tonight we’re going to talk about why cities are struggling financially, and then talk about how we can think differently about our approach to growth and development, to actually build stronger places.
Our mission of our organization is to support a model of development that allows our cities, towns and neighborhoods to become financially strong and resilient.
I want you to think about the way we built cities thousand of years ago.
These are two artists of renderings. The one on the left is an ancient city called Ur, Fertile Crescent like 4,000 BC. The one on the right, of course, is ancient Rome. When we think about these cities, we look at them, and we understand they were built around the dominant transportation technology of the day.
That, of course, being your two feet. People walked everywhere they went. The scale, spacing, the distance between different types of things you would do on a normal day, all this was based around the society of people who walked. We can fast forward thousand of years, this is my hometown.
I live in a little city called Brainerd, Minnesota. It’s about two and a half hours north of Minneapolis‑Saint Paul. This is what it looked like back in 1904. People would ride by train, they would arrive by stagecoach, but once they got there, they would go everywhere by foot.
The scale, the spacing, the distance between different types of things you would do on a normal day, all this was based around a society of people who walked.
Beginning in the early 1900s, and then accelerating after World War II, we began to build cities around a different transportation technology. We began to build cities around the automobile.
If we talk to people, about this transition, they’re more than likely to explain it in terms of progress. We used to be a society of people who walked everywhere. Now, we build cities around people who walk…We used to build cities around people who walk.
Now, we are a society of people who drive everywhere, so we build cities around people who drive. Someday we will have jet cars, and we will build cities around people with jet cars.
Someday, we will teleport, and our cities will look completely different than they do today. This is a narrative of progress, and it’s very comforting to us because it puts these changes on a continuum of things always getting better.
I want to plant another concept in the back of your mind as a different way to think about this. It’s kind of a backdrop for the conversation we’re going to have tonight. When we look at even ancient Ur, we have to acknowledge that humans had been experimenting with how to build cities by the time you get to that for thousands of years.
They had been trying things. What worked they would keep and incrementally expand upon. What didn’t work they would throw that knowledge away. People died, cities went bad. Those ideas were not passed on to the next generation.
By the time you get to ancient Ur, and certainly, by the time you get to ancient Rome, you have an approach to growth and development, and city building that had been built by trial and error over thousands, and thousands of years.
By the time you get to my hometown in the early 1900s, you have an approach to building and development that is essentially universal. We can go to cities around the world. While we see different building materials, and different architectural styles, the essential layout and design of these places is pretty similar. All based around a trial and error approach of what worked.
When we look at this style of development, even though for almost everyone in this room, this is all we’ve ever known. This is the way things are done. It’s important for us to understand that this is a very, very young experiment. This is a very new way to do things.
We didn’t try this out for a couple hundred years in Washington State or California and see what happened there, and then take the best ideas, and migrate them here. We just built this way everywhere, all at once.
In one generation we transformed an entire continent around a new set of theories on how to build growth and prosperity in this country. We transformed our economy. We transformed our approach to building. We transformed the economic ecosystems of our cities.
It is important for us to understand that this is a huge experiment.
Nobody has ever attempted the transformation of an entire continent within a generation, the way we have. I want to talk tonight about some of the financial ramifications of this.
Some of the things that maybe weren’t apparent to us when we began this, two‑plus generations ago. If we go back to Salem of 1916, and we said in that context and environment, we are interested in job creation, and the economic growth and development.
Those things were going to be a byproduct of things we did locally. If there was going to be a job created, we were going to do that here. If there was going to be growth and development to new things being built, that was going to come from us.
After the Depression, after World War II, those things became a shared responsibility between local governments and state and federal governments. Today at the local level, we finance growth and development using three primary mechanisms.
The first one is transfer payments between governments. The idea that the state government, the federal government as our partner in creating growth, will do things like job incentives, infrastructure grants, different types of programs to allow us to create growth at the local level.
The second mechanism is transportation spending. The idea that we would pool our money, use that to build not only interstates but local highways, frontage roads, interchanges, transit systems, other things that create jobs while they’re being built. Then, afterwards provide a platform, where locally we can experience additional growth.
The third mechanism is debt. While public sector debt is an important part of the conversation, far more important is private sector debt.
The ability of individuals and businesses to get long‑term financing with very little money down at very low rates, have those products sold off onto a secondary market, secure ties bought up by pension funds around the world. It creates an enormous amount of liquidity.
These mechanisms combine at the local level to help us create growth. Of course, the growth is good. It’s important to who we are because it gives us the money to do the things we want to do. This is city administration 101. If the city is growing we have more revenue, we can go out and do all the things that we want to do. There’s some really powerful incentives at play here.
When we look at new growth in this paradigm, the initial cost that we have, the initial cost to the public, is usually very minimal. We may have some staff time. We may have to upsize a pipe. We may have a little local match. The bulk of the money being spent to build all those homes, to build all those businesses, to put in all that new infrastructure, is being spent by someone else.
The benefit, however, that we realize is substantial. Not only do we have all the new transaction fees, but now we’ve got the new property tax growth. We’ve got all these new wealth coming in. We’re feeling very, very rich.
The catch is that we, the public, the taxpayer, the city, agree that we will take over the long‑term responsibility to serve and maintain all this stuff. We will forever, into the future, provide police protection, fire protection, fix the roads and the streets, and the curbs and the sidewalks, and the pipes and the pumps, and the valves. All that becomes our long‑term responsibility.
We are, in a sense, exchanging a near‑term benefit in cash for a long‑term liability. There’s only one of two ways that this strategy makes any sense. Either growth is going to continue at ever accelerating rates. In other words, we’re always going to be able to create a whole bunch more new stuff.
We can take that cash and use that to make good on all the promises we’ve made generations prior. Or, the pattern of development, the way we actually go about building and assembling our places, is going to generate for us more wealth and prosperity than it generates long term in cost.
Now, I think everybody in this room understands that the first assumption is not true. It’s not mathematically possible. But even if it were mathematically possible we’ve lived through enough of this where we know we’re not going to grow exponentially forever.
Unfortunately, the second assumption is also not true. For a little bit of time here, this presentation will get a touch technical. I am an engineer, so I have to do a little bit of that. One of the things we did early on at Strong Towns was to challenge the notion that we have come to call the quantum theory of economic development.
The quantum theory of economic development goes something like this. We do a project over here that we know makes no financial sense. We do a project here that makes no financial sense. We do a project here that makes no financial sense. But, you can’t measure them individually. You have to just trust that collectively when they’re put together, awesome things start to happen. [laughter] That is essentially the quantum theory behind economic development today.
You can’t measure it because it changes once you do. What we said is, “OK. If that’s true, there are still parts of the system that we should be able to go out and measure. There are parts of the system that, if this overall theory works, should be, in a sense, profitable for the community.”
Example number one, a dead end road with a cul‑de‑sac. This is a dead end road. There’s not through traffic. There is no commercial traffic. The only reason this road exists is to serve the people along it. If those homes were not there, there would be no road.
This was built in the mid‑1990s. When it was constructed, the city wanted it paved. The city paid half the cost, the property owners paid the other half. We analyzed the amount of revenue being produced to the city by those properties and said, “How long is it going to take the city to recoup the amount of money they spent to build that?” The answer is 37 years.
That’s 37 years for half. The road won’t last that long. When the city goes out to fix it, the city has to pay the full cost. Those taxpayers pay money every year for the city to maintain the roadway.
Here’s another development. This one is a closed loop system with a dead end cul‑de‑sac. Again, no through traffic. No commercial traffic. This one was built in the mid‑1980s. The developer paid for all the cost of the infrastructure.
That money was then rolled over into the sale of the properties, so people have been paying for that on their mortgages for years. At the same time, they’ve been paying taxes to the city to fix it and maintain it. It fell apart. The city went out and fixed it. The cost was $354,000.
We asked the question, “Based on the revenue the city is collecting from the property owners that live here ‑‑ the only reason the road exists is to serve them ‑‑ how long is it going to take the city to recoup the amount of money they just spent to fix it?” The answer is 79 years. The road won’t last anywhere near that long.
We said, “OK, let’s say the city wanted to, between now and the time the roadway fell apart, collect enough money from these property owners to actually have the revenue to go out and fix the road.” What would that mean?
It would mean an immediate 46 percent increase in taxes, with annual increases of three percent over inflation every year for the next 25 years, with all the money going just to fix the roadway. The sewer, the water, the storm sewer. Vastly more expensive undertakings.
Now, some of these people say, “OK, Chuck, we get it. We know we lose money on residential. We’ll make it up on commercial.” My gut reaction to that is always, “I don’t know any corporation that loses money on 90 percent of what it does and tries to make it up on the last 10 percent.” I don’t know why an incorporated municipality would find that to be a good business strategy.
Nonetheless, we have somewhat convinced ourselves if we just have enough commercial, it doesn’t matter what else happens.
This is a business park. This is one of those “build it and they will come” investments that cities like to do. This was built in the mid‑1990s. Every single lot is occupied now. The city felt this was such a successful project, that they wanted to build the exact same thing on property they owned right next door. They literally wanted to build exactly this, right over here.
We said, “All right. If we can build the exact same thing, for the exact same amount of money, and get the exact same amount of investment, would this be a good project?” In today’s dollars, it would cost 2.1 million. There is $6.6 million today in this park in actual, taxable value.
Now, pause for a second. Of those developed lots, four of them are a church. Two of them belong to a school district. It’s their bus maintenance facility. One of them is a county maintenance garage. One of them is a city maintenance garage.
These are all very important public facilities. We need churches, we need schools, we need maintenance buildings, but none of them pay any taxes to the city. Of the remaining lots, the ones that theoretically would be private sector taxpayers, every single one was either sold for a dollar and/or given a long‑term tax subsidy in order to attract them to move into this park.
For the sake of our analysis, we assumed that every single lot would be built upon within 12 months of this project being completed, by a full taxpaying, non‑subsidized entity, and that every single penny of new revenue went to retiring that bond.
If that were the case, it would still take the city almost three decades, 29 years just to break even. That’s 29 years where everybody else’s taxes would have to go up to pay to plow the snow, mow the ditches, provide police and fire protection, and every other service that was needed. That’s in the most wildly optimistic scenario.
When I first met with that foundation, I went through about 15 of these, because I very, very was proud of them. [laughs] If you’re someone who likes case studies, I’ll give you our website address in the end. There’s a ton of them on there. You can go through them and look. I found that after three, people start to cry… [laughter] Things go in the wrong direction.
I found that I can make the point with just three. Let me show you what’s going on. This is a cash flow diagram. I’m going to apologize. I like charts. I’m an engineer. I know a lot of people don’t. There’s four charts in this presentation, then will be done with the geeky stuff.
Say that a developer comes to town [and says to us]:
“I have a piece of property here I would like to develop. I will, at my expense,
pay to build all of the residential buildings, all the commercial buildings.
I will follow all of your rules and regulations.
I’m not asking for any subsidies.
I will, at my expense, go in and put in all the required infrastructure.
I’ll build the roads, the streets, the curb, and the sidewalk.
I’ll pay for the pipes, the pumps, the valve, and the meters. I’ll do all of that.
The only thing that I’m asking, as a developer, is that when I get done making this massive investment in your community, that you, the public, the taxpayer, agree to take over the long‑term responsibility for serving and maintaining it.”
What would we say? We’d say, “Fantastic. You mean you want no subsidies? You’ll follow all of our rules? You’ll pay for everything?” This is the ideal scenario.
We’re smart Salem residents. We’ve heard of this Strong Towns stuff. We’re good, prudent people. We’re Minnesotans with topography. When this money comes in from this new development, what we’re going to do is we’re going to take that portion that normally gets spent in other places and we’re going to set it aside. Every year when that money comes in, we’ll take that portion out that normally gets spent fixing other things.
We’ll set that aside and we’ll allow it to grow, so that when we get out a generation from now, and the people then have to make good on that promise that we’re making today, that we’ll take care of that stuff forever, they’ll have a pot of money to do it.
This is what it looks like.
In year one, everything’s brand new. Didn’t cost you anything. The money comes in, you take that portion, and you set it aside. In year two, more money comes in and you add to what you had in year one. In year three, you add a little more, in year four, in year five, and on and on.
And you see that a five‑year‑old street doesn’t cost you anything. A 10‑year‑old sidewalk isn’t costing you anything. A 15‑year‑old pipe isn’t costing you anything.
For decades, all that happens is money comes in and it just continues to grow. You get out 20‑something years and you’ve got quite a pot of money there.
The problem is when you get to, in this example, year 25, and you have to actually go out and fix something, what you find is that the cumulative amount of revenue is insufficient. From a cash flow standpoint, you run far into the negative.
Now, cities are not one development. Cities are a collection of developments or a collection of neighborhoods. Let’s say that our developer comes back in a couple of years later after that first development and says, “You know, that worked really well for me. That worked really well for you. I have a similar‑sized development I would like to do.”
Every other year, from this point forward, a developer walks in the door with a similar- sized development. In other words, the ideal scenario for any city. Nice, steady, continuous growth. We take that money, we set it aside, and we save it for the day when we have to make good on all these promises.
Here’s what that looks like. In year one, you’ve got your first development that comes online. It pays in the entire 25 years shown. In year three, you’ve got another. In year five, in year seven, and you can see, not only do you not have any costs, but you’re having a lot of growth. You’re having growth upon growth upon growth.
Your cash actually starts to accelerate upwards. You’re feeling very, very rich. When you get to year 25 and you have to make good on that very first promise you made way back in year one, yeah, you got to spend a bit of money, but it’s not a big deal. You’ve had all this growth.
The growth creates what we call the illusion of wealth. Because we all intuitively understand, if you lose money on every transaction, you don’t make it up in volume. If you lose money over the long term on every project that you undertake, the longer you go out in the time horizon, the more downward pressure there is on your budget.
This is the answer to that question, “Why are cities struggling financially? Why don’t we have money to do basic, basic things? Why despite all the growth, despite all the job creation, despite all the tax subsidies, incentives, and everything we do to juice up our local economies, do we not have the money to do basic, basic things?” It’s because we’re living way out here. [Points to right side of chart above.]
I want to ask you a couple of questions. Do you recognize yourself in this chart here? We’re having this insane election cycle where each side of our political dialogue has all this blame for the other side. It’s greedy corporations. It’s lazy people. It’s whatever your insane thing is. Do you recognize yourself here?
This is why people smoke. [laughter] I smoke and then, oops, emphysema.
This is why you will go home and have that bowl of ice cream and watch TV instead of going for a walk. “This ice cream is good. I like this TV show. Uh‑oh, heart disease.”
It’s called temporal discounting. We are wired as human beings to highly value positive things today and deeply discount negative things far into the future. That is a human flaw.
What happened to the civilization thousands of years ago that built their cities based around the exploitation of this human flaw? What happened to them? They went away. Their ideas were not transmitted to the next generation. Their ideas failed and it did not go on. I have one more chart to show you. It’s slightly more depressing than this one.
Then we’ll start talking about other things and that’s the end of charts, but this one is very important. This is a graph of debt. Everyone in this room knows the narrative about our public sector debt. It’s massive, approaching $20 trillion. I’ve had seven quarters of calculus. I’m not going to pretend that I can grasp what $1 trillion is, let alone 20 of them.
You guys had the “Weekly Reader” when you were little? We had the Weekly Reader. I remember in fourth grade, there was a little breakup box in the Weekly Reader. It said, “If you took the national debt, converted it into dollar bills, and stacked them on top of each other, they would go to the moon and back 23 times,” or something like that. As if for a fourth grader, replacing one abstract concept for another abstract concept would clarify things. [laughter] These are monstrous sums of money. They’re beyond our ability to grasp or fathom.
In this graph, here, the bottom line, the blue one, this is the growth in our national debt. The black one right above it is the growth in our GDP. That green one, the one that soars up like that, that’s the growth in our private sector debt. That’s debt we share.
That’s home mortgages, commercial real estate loans, auto loans, credit cards, margin interest accounts, student loans, private sector debt. The way we financed this first generation of this new exciting way to build a prosperous America was by using our savings and by reinvesting that illusion of wealth back into creating more growth.
When things started to bog down, when we had liabilities starting to pile up, promises we had to make good on, things in our economy started to slow down. It took us a while culturally to figure out what to do, but we eventually shifted from an economic model based on growth through savings and investment to one based on growth through debt accumulation.
Growth through debt accumulation became such an important part of keeping everything going, that we eventually allowed our financial system to become predatory. We needed the growth so badly that we allowed our financial system to prey on our friends and neighbors.
You can’t afford a home? Now you can. You could afford a small home? Nope, now you can afford a large home. You can afford a large home? Well, now you can afford multiple large homes.
Our ability to extend this experiment by having our financial system prey on our friends and neighbors, is just not there. Obviously, there’s some huge implications in all of this. The mechanisms of growth that we become accustomed to are waning. The state and federal government are vastly over‑committed. They have made more promises than they have money to fulfill.
They are not going to be coming to the rescue of every city that goes through economic hardship. Look at Detroit as exhibit A.
The DOTs are functionally insolvent. Your DOT has built more lane miles than they have any possible expectation for future revenue to maintain. Your system, like every state transportation system, is going to experience contraction over the next decade, not expansion.
The private sector is tapped. We cannot continue to accelerate debt. This has some obvious implications for local governments.
We’re going to be forced to absorb the cost of our development pattern. If we want that road fixed, we have to pay for it. If we want that pipe repaired, that money is going to have to come from us. This can’t be done in the current pattern of development without some incredibly large tax increases and/or some devastatingly large cuts in services.
I didn’t come here to tell you what you already know. This is the debate we’re having at every level of government everywhere. How big is the tax increase going to be? Who should pay for it? How deep is the service cut going to be, and where is that going to be felt? It is critical sitting here tonight that we see the third variable in this sentence. The third variable being the current pattern of development.
As long as we continue to build in an approach that is functionally insolvent, there is no way that our cities are going to avoid insolvency. As long as we continue to build in a way that gives us an illusion of wealth today in exchange for enormous long‑term liabilities, there’s no way that our cities are going to avoid default.
Whether that is a hard default, like we see in places like Detroit and Stockton and San Bernardino, or whether it is a soft default like we see in thousands of cities across this country where they’re laying off police and firefighters. They’re not maintaining parks, they’re turning off street lights. They’re putting off critical maintenance because they just don’t have the money. This sound familiar?
We have to start having a conversation about how we build cities that are financially more productive. How do we do this? Early on, after the first phase of meeting with groups of two and three and five in the basement of churches and rotary clubs, I got invited to come speak in California.
We actually did 11 talks in five days. I started in Redding and ended up in San Diego, so I saw all of California. Spent the night on a lot of couches, ate a lot of In‑N‑Out Burger, hung out with Will a little bit. But everywhere we went and spoke, we got the same feedback. “Chuck, you have scared the heck out of us, but you didn’t tell us the solution to these problems. What is the solution?”
It took me a while to hear what these Californians were saying to me, because what they were really saying to me was something subtly different than the actual English translation of their words. [laughter]
What they were saying is this, “What can someone else change about what they’re doing so that I don’t have to change anything about what I’m doing?” [applause]
I am not aware of any such solution. In fact, no such solution exists. We have created for ourselves a very complex set of problems. Problems that defy a solution or even a series of solutions.
What we talk about at Strong Towns is, “How do we rationally respond to this complex set of problems? How do we, as smart, thoughtful, intelligent people, living together in a community look at all the problems we face, roll up our sleeves and then rationally respond to them?”
When we start talking about rational responses, I always start with this photo here. Again, this is my hometown back in 1904.
When I first saw this photo I was blown away, I was astounded. The way the buildings line up just perfectly. The way they frame the public realm at just the right Greco‑Roman ratios. The segmentation of the public realm. The buildings have great symmetry, they front the street in a beautiful way. This is an exquisitely designed street.
Let me ask you some questions about these people:
How thick was their zoning code? [laughter]
How many boards and committees did they have to go to to get an approval to build something?
How much tax subsidy did they give out?
How many shovel‑ready sites did they have prepared?
How much infrastructure did they put in the ground to attract this development?
How many engineers and planners did they have on staff advising them?
How many economic advisers did they have telling them what to do to create all kinds of growth?
These people had none of the things that we consider today essential to building a successful place. They didn’t even have 30‑year mortgages. These were a bunch of illiterate lumberjacks in the middle of nowhere.
How did they build this place? How did they do it? It’s really simple. They copied what they knew worked.
They took the materials they had on hand and they built in a style and a pattern that they had seen work for thousands and thousands of years.
After 70 years of all the policies to create growth, and jobs, and economic development, after all, the codes, and ordinances, and programs. After all the advice from engineers, and planners, and economic development advisers, here’s what the street looks like today.
[Audible gasps heard]
It’s a wasteland of parking and half occupied buildings. If you want to grasp in one photo why our cities struggle, understand there’s a half million dollars of public infrastructure in that little stretch of street right there. Where is the wealth that will sustain that generation after generation after generation?
I was giving a lecture at a university in Boise, Idaho. I got to this picture and a student raised their hand and stood up and said, “Chuck, I’m from Costa Rica. Costa Rica is a very poor country. We can’t afford to build the way you do here.
“When we build we have to build one block at a time, and before we can build the next block we have to make sure that the block we just built, all the spaces are filled in, otherwise we won’t be able to afford it. We’re a very poor country, we can’t afford to build this way.”
We’re a very poor country now, too, and we can’t afford to build this way either. For a long period of time, that illusion of wealth made us think that this kind of thing didn’t matter. We could run pipe and road all over the place.
We could walk away from whole neighborhoods. We could see places go into decline and it didn’t matter because we were so rich. But it does matter, and now we’re going to start talking about how we think differently about the way we develop and build our places.
The first thing we need to do is get rid of our worst cultural habits. “Build it and they will come,” is a brilliant movie plot. [laughter] It is a terrible economic development strategy.
We are in what we at Strong Towns call the “desperation phase” of this suburban experiment. We are so desperate for growth, we are so desperate for the next thing that will get us through the next budget cycle that we do all kinds of insane things.
We are prepared to hand out tax incentives to people who come to town.
We are building shovel‑ready sites so that we can attract new growth. If you want to be a player in the game today taken seriously in economic developments you have to be willing to spend yourself into oblivion to make it happen.
This is not how cities build wealth, and this is not how cities have ever built wealth. I’m going to show you now the very simple way that cities build wealth.
Do any of you recognize this city here?
If I told you this was Portland would that surprise you? No, because at some point in the past Portland looked just like that. If I told you this was Salem would that surprise you? No, because at some point in the past Salem looked just like that. If I said it was San Francisco or Vancouver, they look like that.
The trees aren’t right so it’s not LA or San Diego, it’s not Dallas or Houston, but all of them started in the same way, a little collection of pop‑up shacks. If we go back far enough, Chicago started this way, Manhattan at one point looked just like this. We can keep going back…London, Paris, Rome.
This could be Romulus and Remus standing here at one point in history. [laughter] Rome was a collection of little pop‑up shacks at one point.
Every city that was ever created prior to this new experimental way to build started just like this. Some pop‑up shacks and some hopes and dreams. We built thousands of these across this continent, and for a variety of complex reasons, reasons that defy our ability to predict or project or even to fully understand after the fact, a lot of these places failed.
When they failed, what happened? Did unemployment skyrocket? Did the stock market crash? Did we have to have an emergency session of Congress to bail out Wall Street banks? No. A few people lost a little bit of money. They salvaged what they could and they moved on to the next place. These were little bets.
We built thousands of places like this across this continent, and for a variety of complex reasons, reasons that defy our ability to predict, or project, or even to fully understand after the fact, a lot of these places were successful. When they were successful, they would grow in a very simple to understand way. They would grow incrementally up, incrementally out and become incrementally more intense.
This is my hometown, this is Brainerd. This is what it looked like in 1870.
34 years later, after incrementally growing up, incrementally growing out and incrementally becoming more intense, this exact same street would be that street I showed you earlier.
After another 40 years of growing incrementally up, incrementally out and becoming incrementally more intense, these two and three story wood structures would become buildings of brick and granite.
We don’t build wealth by going to the casino and putting it all on red. The way we build wealth is by making small investments over a broad area over a long period of time.
Let me show you how financially potent this style of development is. These are two identical blocks in my hometown. The one on the left I’ve labeled old and blighted. The one on the right I’ve labeled shiny and new. If you look at them you’ll see they’re the same size, the same area, the same amount of public infrastructure.
They have the same thoroughfare, the same neighborhood. Everything about them is the same, except for the style of development that is upon them.
That old and blighted block looks like this. Back in the 1920s as my city was growing incrementally, the next increment of development were these three blocks.
[Points to upper left hand photo] What you are looking at here is the cheapest commercial building that you are going to be able to build on the far edge of town in the 1920s.
Had things progressed as they had for thousands of years, what would have happened? You would’ve eventually got second and third stories, they would’ve became more ornate, more intense. But that’s not what happened. These were built and then we had the Depression, we had World War II, and then we had this completely new style of development that just skipped right over this and started building out on the edge.
These buildings have stagnated for 90 years. [The next] two blocks over used to look just like this. The city had it torn down and now we have a brand new taco drive‑through. [Points to right-hand photo above.]
Everybody was thrilled with this transaction. We got rid of blight. We now have a property that conforms to all of our zoning codes.
It meets the floor area ratios, it meets the parking requirements, it meets the sign ordinance.
The engineer was happy because we got rid of the on‑street parking and now the cars can flow through more smoothly.
The environmental people were happy because they have a little bit of green space and they convinced them to put native plants in the stormwater area.
Even the bike/walk people are happy because they got a sidewalk. The sidewalk ends right there, but they got that stretch. [laughter] Here’s what nobody bothered to consider.
That old blighted rundown block when this was built had a total property value of $1.1 million. That shiny and new block two blocks over, the same size area, the same amount of public infrastructure, the same everything just a different style of development is only worth $800,000.
On the day this [taco place] was built, the city was collecting 42 percent more taxes from that old run‑down block.
Understand what you’re looking at. You are looking at the traditional pattern of development, the way we built places for thousands of years in its infancy after 90 years of neglect, and it still outperforms by a wide margin the stuff we build brand new today.
We all know the trajectory of the taco joint.
20 years from now this will be turned into a used car lot, There’ll be a new taco joint up the road. 10 years later it will be boarded up, we’ll be trying to get a grant to get it torn down. We’ve all seen this, we’ve all been around long enough to see this life cycle of that style of building.
In fact, in the years subsequent to this being built, here’s what’s happened to the property values.
This is the kind of thing we see in our cities, the way we denude our cities. Out on the edge we see the same kind of thing.
[Points to left-hand photo.] This is our big box store. This is our most valuable piece of property out on the edge of town. This is 19 acres, a double sized big box auto dealership gas station. This is the Mills Fleet Farm site. When the Mills people come to a meeting, we just stop what we’re doing and say, “What help do you need? What do you need from us?”
You guys don’t have Mills Fleet Farm. Mills Fleet Farm . . . mid‑western big box store. Very successful. When you walk in, auto parts, animal feed, lumber, guns and ammo, camouflage lingerie. That’s the product mix. [laughter] They’re wildly successful. We have the biggest one in the world. Brainerd is the home of Mills Fleet Farm. Don’t read too much into that.
[Points to left-hand photo again.] This is 19 acres. This is the most valuable 19 acres in the entire area.
[Points to right-hand photo again.] This is 19 acres of our core downtown. If you have seen the movie “Fargo,” you have seen a not so flattering but not so inaccurate portrayal of my hometown. We don’t talk that way, though, at least not when anyone else is around. [laughter]
19 acres, no new buildings have been built there in my life.
We’ve torn quite a few down for parking lots. A number of others have burned down, and we cleared away the rubble and they’re now parking lots. This is a place where the second and third stories are largely unoccupied. The first story struggled to keep tenants. This is not a downtown you take people to when they come to visit.
Yet when we step back and look, we see that 19 acres out on the edge has a total value of $600,000 in acres, is a huge pot of money in one place. But when we compare it to the 19 acres in the downtown, what we see is that downtown we collect 78 percent more property tax. Sales tax [from each], even though one is a regional draw and one is a local draw, are about even.
How much did we spend to get that big box draw on the edge?
We spent almost a couple hundred million on the bypass.
We spent millions more on frontage roads, backage roads.
We spent $10 million to get the water and another $10 million to get the sewer out to this site.
When I was an engineer I actually designed this road here, this backage road. This was $2.6 million.
How much did my generation spend to get that development in the downtown?
Nothing. That was wealth that my great, great grandparents and their contemporaries built, slowly and incrementally over time, and then bequeathed to us as an endowment of sorts. We’ve kind of slowly melted down.
What happens when Mills Fleet Farm goes out of business? It’s heretical to say around my hometown because we love Mills Fleet Farm, but at some point in the future that will not be the highest and best use of that property. . .it will go away. [Just as] we do not have the Hudson’s Bay Company, at some point in the future, this will be gone. What happens then?
I don’t know. But experience tells us by looking around that whatever it is will be lower on the economic food chain than this. This is the peak today.
There’s 134 different properties in the downtown.
What happens when one of them loses a tenant?
What happens when one of them goes out of business.
What happens when one of them chooses to retire?
What happens when it’s discovered that planners are not infinite in their wisdom and we actually have too much office space and not enough residential space? Or too much retail and not enough office?
These buildings are highly flexible. You don’t have to be Nostradamus. You can change them over time. If you need something more, they’ll flex into something else. I have seen buildings go from being a pizza place, to an account’s office, to a thrift store.
Our new building style is not only not very productive, but it is very, very fragile. Our traditional development pattern not only is financially really, really productive but has tremendous amounts of adaptability and resiliency.
Benton County, Oregon, and the seven ways ranked-choice voting improves our democracy.
By Sightline’s Kristin Eberhard
This article is part of the series Archaic Voting Systems Cripple Democracy
The way we vote, not just how much money moves through political campaigns, also affects how well a government represents its ordinary voters.
Most Americans are all too aware of the problem of big money in politics, but they may not recognize the sibling scourge of slanted voting systems. That is, the way we vote, not just how much money moves through political campaigns, also affects how well a government represents its ordinary voters.
Cities, counties, states, and provinces in both the American and the Canadian parts of Cascadia could improve their representative democracies––-i.e., give more voters a bigger say in choosing candidates to represent them—by simply updating their voting systems. And in southern Cascadia, Benton County, Oregon, is poised to do just that.
Benton County’s big ranked-choice chance
Benton County, Oregon, surrounds the small city of Corvallis and is home to Oregon State University. This November, voters there will have the chance to vote for Measure 2-100, authorizing ranked-choice voting in future general elections for their three county commissioners and county sheriff. It’s an opportunity to show the rest of Cascadia how a voting system called ranked-choice would not only make more votes count, but would give voters the chance to express their true preferences, elect candidates that the most voters like the most, reduce negative campaigning, and engage more voters in the civic process.
The time is ripe to rethink voting systems, with US voters reeling from the results of this year’s unusual presidential primaries, in which just 14 percent of eligible adults selected the two nominees. The state of Maine is considering ranked-choice voting this November, and Oregon is particularly fertile ground for voting reform because the state constitution specifically authorizes ranked-choice voting.
Back in Benton, the measure sports an impressive list of endorsers, including four state parties, two local party chapters, and a long list of elected officials. If all goes well there, it may build momentum for changes to voting in other Oregon cities and counties, and eventually at the state level. So what’s so great about ranked-choice voting?
1. Voters can vote for candidates they truly support.
Many American voters are dissatisfied with the two major party candidates for president. In November, some plan to “throw away” their votes by casting “protest votes” for a minor-party candidate they know has no chance of winning. But many know that, in a plurality system, voting for the candidate they truly support can nudge election victory to the candidate they like least. To avoid this “spoiler effect,” they will hold their noses and vote for the “lesser of two evils.”
If Benton County implements ranked-choice voting, voters there will not have to face such unpalatable options in future county elections. Voters will rank candidates for county commissioner and sheriff in their order of preference, knowing that the candidate with the most overall support will win. (New to the concept? Here’s a great 4-minute video explaining how ranked-choice voting avoids the spoiler effect and lets voters pick the candidates they actually like best.)
To picture how ranked-choice voting can change elections, imagine Benton County’s ranked-choice voting proposal had been in place this year for federal elections. Bernie Sanders might not have competed in the Democratic party primary, but instead run in the general election as a Democratic Socialist. A left-leaning voter might have filled out a hypothetical presidential ranked-choice ballot like this:
- Bernie Sanders
- Jill Stein
- Hillary Clinton
Meanwhile, Ted Cruz might have chosen to run for president under the Tea Party banner, and a right-leaning voter might have ranked his choices like this:
- Ted Cruz
- Gary Johnson
- Donald Trump
A moderate might have eschewed what he sees as the radical options and chosen to rank:
- Gary Johnson
- Hillary Clinton
The president would be the candidate with the most support from the most people—the one whom many people across the country liked enough to rank at all. Voters would not be forced to strategically check the box for one of two candidates they dislike, nor would they have to let their support for a minor party candidate go unexpressed. Voters would get to say what they mean, everyone would have a clearer picture of what voters want, and the candidate with broadest support would win.
2. Winners have more overall support.
In the “choose-only-one” plurality elections we use throughout Cascadia, we vote for one candidate, and that person either wins or doesn’t win. Very often, candidates win with only a plurality of support—not a majority of votes, but more votes than anyone else. In other words, the majority of voters voted for someone else.
Ranked-choice voting means that voters don’t just vote for one top choice but get to rank their top three choices. If your top candidate doesn’t win, your second choice is still counted. This requires winners to have support from the majority of voters.
Fringe or extremist candidates with a plurality of support but opposition from a majority of voters can’t slide into office; only candidates who appeal to a majority of voters can win. The candidates who win are the candidates who are most respected and best liked overall in the electorate, and people are represented by elected officials that more people can agree on.
3. Candidates reach out to more voters.In the current system, a candidate can fire up his or her base, ignore or even insult the majority of voters, and still win. That strategy won’t work with ranked-choice voting.
Minneapolis Mayor Betsy Hodges explains that to win her ranked-choice race, she had to go everywhere and talk to everyone. That made her campaign strategy more inclusive, and the city’s voters elected a candidate whose message resonated with a majority of voters, not just a plurality.
San Francisco mayoral candidate David Chiu explains that in a “choose-only-one” race, he would ignore voters who support another candidate. With ranked-choice voting, though, he engages all voters to try to win majority support, whether he is a voter’s first-, second-, or third-choice ranking.
4. Minority groups have more voice.
Because candidates must broaden their appeal to win under ranked-choice voting, they would have to play beyond the older, whiter, more male voters who dominate low-turnout party primaries. To win in November, candidates would have to reach out to minority groups such as people of color and LGBTQ communities, giving those groups more power and engagement in the election process than they have under “choose-only-one” elections. Indeed, San Francisco’s record with ranked-choice voting suggests that more people of color might win office with a ranked-choice ballot.
5. Campaigns are more positive.
Negative campaigns plague our winner-take-all system. But ranked-choice voting rewards positive, inclusive, and informative campaigns.
Ranked-choice voting encourages candidates to run a positive campaign that appeals to more voters.
A two-year study of 22 American cities verified that voters in ranked-choice cities perceive less campaign negativity than voters in plurality cities. Betsy Hodges explains: it doesn’t pay to “talk smack” about your opponents if you are simultaneously trying to woo their supporters to award you their second-choice ranking. Candidate David Chiu describes how ranked-choice voting encourages candidates to run a positive campaign that appeals to more voters.
6. Third-party candidates have a real shot at winning office.
Independents—people who don’t identify with either of the two major parties—are the biggest and fastest-growing group of US voters. The trend is even more stark among younger Americans: nearly half of millennials consider themselves independent.
Two parties can’t adequately represent the diversity of Americans, but the plurality voting systems flouts voter preference and the ideals of representative democracy by shoe-horning voters into two major parties, under threat of spoiling the election. (Think of voters who wanted to vote for Ross Perot but didn’t want to spoil the election for George H. W. Bush, or voters who wanted to vote for Ralph Nader but didn’t want to spoil the election for Al Gore.)
With ranked-choice voting, Benton County voters will be able to rank a candidate from, say, the Pacific Green Party, the Independent Party of Oregon, or the Libertarian Party without fear. If one of those candidates wins support from a majority of county voters, he or she could win a seat on the county commission.
7. The idea could spread.
Change usually doesn’t happen all at once. A few innovative spirits identify a better way, take the leap to show the improvement, and others follow suit with these new best practices. Benton County is joining other cities around the country in reforming voting systems, and if it works there, other Cascadian cities and counties may go next.
A few more things to know about Benton County’s ranked-choice voting measure:
More people might vote.The data on ranked-choice voting and voter turnout is mixed. But Oregon State University, located in Benton County, doubled student voter turnout when it started using ranked-choice voting in student body elections in 2014, so Benton County might also see a boost.
The party primaries will remain the same.
Other cities using ranked-choice voting eliminate the primaries, letting all candidates compete in the ranked-choice general election (for example, San Francisco, California; Minneapolis, Minnesota; and Portland, Maine). Benton County’s measure would keep the party primaries intact, only implementing ranked-choice voting in the general election.
This approach has political and practical benefits. The two large political parties often oppose ranked-choice voting because it replaces party primaries, weakening the major parties’ roles in elections. By not touching the party primaries, Benton won support from the Benton Democratic Party and does not appear to have incurred opposition from the Republican Party.
As a practical matter, the primaries will ensure Benton ballots don’t get too long and overwhelming for voters. On the November ballot, voters will continue to see the Democratic and Republican candidates who won their party primaries, plus likely a few minor party candidates. Oregon recognizes three major parties and six minor parties that can nominate one candidate each to the general election ballot by submitting a nomination form, like this one for Pacific Green Party candidate Timothy Dehne, running for Benton county commissioner in November.
Benton will seek implementation funds from the state.Even if the measure wins at the ballot, it has to jump another hurdle: raising up to $200,000 in funds from the state or other sources for implementation and voter education.
Benton already has ranked-choice capable voting machines, so it won’t need to pay to replace its hardware. However, the machines will need a software update to count ranked-choice ballots, and voters will need information on how the new ballots work.
State representative Dan Rayfield is a co-petitioner for the Benton initiative, so he may convince fellow legislators to allocate some or all of the money to try ranked-choice voting in Oregon. Charitable sources interested in better voting methods might supplement whatever the state gives.
This American presidential cycle put the perils of plurality voting on display. Voters in Oregon and across Cascadia may be ready to try a different voting method that lets them express their true preferences and elect thoughtful, positive leaders with majority support. Benton County is well-positioned to lead the way.
Top Climate Scientist: Tax Fossil Fuels to Save Younger Generations’ Future
“Make the price of fossil fuels honest. Stop subsidizing them. And make them pay their cost to society.”
By Nadia Prupis, Common Dreams staff writer
The report warns that future generations may be forced to use “negative emissions” measures to forcibly extract CO2 from the atmosphere as temperatures keep rising.
Fossil fuels must be taxed out of existence to ensure that future generations are not saddled with a world of rising seas and extreme weather—and all the costs that come with them—according to a new research paper by renowned climate scientist and Columbia University professor James Hansen.
“The science has become crystal clear,” Hansen said Tuesday during a press conference to discuss the report, Young People’s Burden (pdf), co-written with 11 other top scientists and published in Earth Systems Dynamics Discussion. “We have to phase out carbon emissions over the next few decades.”
The research paper warns that “The assumption that young [people] will somehow figure out a way to undo the deeds of their forebears has crept into and spread like a cancer through United Nations climate scenarios.”
As it becomes increasingly difficult to keep global temperature rise below the agreed-upon climate threshold of 1.5°C, the report states that future generations may be forced to use “negative emissions” measures to forcibly extract CO2 from the atmosphere. Those range from simply “improved agriculture and forestry practices” to carbon capture and storage (CCS), a more controversial technique that could cost from $104-570 trillion.
“It is a very dubious idea and the cost of it is not negligible,” Hansen said.
One of the most important measures that can be implemented now is a steadily increasing tax on carbon and an end to government subsidies for the dirty energy industry, Hansen said Tuesday.
“There’s a misconception that we’ve begun to address the climate problem.”
“Make the price of fossil fuels honest,” he said. “Stop subsidizing them. And make them pay their cost to society.”
“If we put a gradually rising fee on carbon emissions, it will spur the business community and entrepreneurs and the public to develop carbon-free energies and energy efficiency, and it will spur the public to change their choices so that we move rapidly to reducing emissions and move to clean energy,” he said.
The research paper also finds that the planet is the hottest its been in 115,000 years, all due to climate change—and the landmark climate agreement is unlikely to bring about substantial change, Hansen warned.
“There’s a misconception that we’ve begun to address the climate problem,” he said. “This misapprehension is based on the Paris climate deal where governments clapped themselves on the back but when you look at the science it doesn’t compute, it’s not true.”
The former NASA scientist is one of nearly two dozen plaintiffs in a historic lawsuit filed against the U.S. government by the legal nonprofit Our Children’s Trust, which alleges that lawmakers are actively causing climate change and not protecting the environment, thereby depriving future generations of their constitutional right to life, liberty, and property. The other plaintiffs range from ages nine to 20.
They include Hansen’s 18-year-old granddaughter, Sophie Kivlehan, who said in a joint video discussion released alongside the report, “Today’s adults benefit from fossil fuel burning and leave the waste for young people to clean up. We should be moving on to clean energy, leaving dirty energy in the ground.”
In Canada on Monday, Prime Minister Justin Trudeau announced the launch of the nation’s first-ever carbon tax that will begin at $10 per ton in 2018 and increase by $10 per year until 2022.
The framework “sends a clear signal that we’re all in this together and that we need a federal approach to regulate carbon pollution,” said Amin Asadollahi of the International Institute of Sustainable Development, but critics said the tax price is too low to make an impact.
“I was very disappointed we were starting with $10 per ton,” said MP Elizabeth May, leader of the Green Party, “which is so low under British Columbia’s carbon tax of $30 per ton. It was an obvious political calculation.”
If fossil fuel emissions continue as usual, droughts lasting as long as 35 years a “near certainty” in parched Western U.S. states
“Historically, megadroughts were extremely rare phenomena occurring only once or twice per millennium,” the new study notes. “According to our analysis of modeled responses to increased [greenhouse gas emissions], these events could become commonplace if climate change goes unabated.”
“Megadroughts” that last for decades are threatening to strike already parched Western U.S. states by the end of the century, a new study finds, with one model predicting that a drought lasting about 35 years may be a “near certainty.”
A megadrought would bring back the devastating dustbowl conditions of the 1930s to California, Utah, Nevada, New Mexico, and Colorado, but would last for a much longer period of time, according to the study published Wednesday in the journal Science Advances.
“Using a combination of temperature and precipitation models,” the Guardian reports, “the study predicts a 70 percent chance of a megadrought by the end of the century, should rainfall levels remain the same, with a 90 percent chance of an elongated drought should rainfall decrease, as most climate models forecast.”
“We can’t rule out there could be a 99.9 percent chance of a megadrought, which makes it virtually certain,” Toby Ault, a scientist at Cornell University and lead author of the study, told the Guardian.
“Historically, megadroughts were extremely rare phenomena occurring only once or twice per millennium,” the study observes. “According to our analysis of modeled responses to increased [greenhouse gas emissions], these events could become commonplace if climate change goes unabated.”
A map shows the rising risk of megadraughts corresponding to varying increases in global temperatures. (Image: Science Advances)
“With 4 degrees of warming, which is the rate the planet is currently heading for, megadroughts are almost a certainty,” EcoWatch notes.
“A megadrought occurring again in the Southwest in the coming decades would impose unprecedented stresses on water resources of the region, and recent studies have shown that they are far more likely to occur this century because of climate change compared to past centuries,” write the study authors, scientists from Cornell University, the Lamont-Doherty Earth Observatory of Columbia University, and the NASA Goddard Institute for Space Studies.
Indeed, California’s six-year-long drought has already changed the landscape, according to the Guardian: “Areas of the Sierras have burned a few times and the forests aren’t recruiting back, they are turning into grasslands and bush lands,” Mark Schwartz, professor of environmental science at the University of California, told the newspaper.
“Water availability is a deep issue for people living in the arid south-west,” Schwartz added. “Megadroughts have the ability to dry up Lake Mead [which supplies water to Las Vegas] and hamper crops in southern California. We are doing a relatively poor job of allocating water efficiently. We need to get better at that.”
“The new report does proffer a crumb of hope,” the Guardian writes, “if greenhouse gas emissions are radically cut then the risk of megadrought will reduce by half, giving a roughly 50:50 chance that a multi-decade stretch of below-average rainfall would occur this century. But the research found that the emissions cuts would have to be far steeper than those agreed to by nations in Paris last year, where a 2C limit on warming was pledged.”
“We would need a much more aggressive approach than proposed at Paris,” Ault told the newspaper. “It’s not too late to do this but the train is leaving the station as we speak.”