Naked City

Rafe Needleman, editor-in-chief of Redherring.com, assured the Chamber of Commerce that the Internet economy is not about to blow a gasket, as skeptics portend.

Last week the Greater Austin Chamber of Commerce reported more bad news for Austin: Yes, the price of housing, cost of living, and traffic congestion are growing problems here, but they're nowhere near as bad as in other burgeoning cities -- Seattle, San Jose, Denver, Portland, etc. Austin is still less densely populated than even Raleigh/Durham, North Carolina; median home prices are below the national average; and job growth is rocketing upward, outpacing the labor supply.

Why is that bad? Because the inevitable migration to Austin will continue, and this may be as good as it gets.

The Chamber handed out its report at a breakfast meeting last Tuesday in a ballroom at the Convention Center. Keynote speaker Rafe Needleman, editor-in-chief of Redherring.com, assured the assembly that the Internet economy is not about to blow a gasket, as skeptics portend. To the contrary, Needleman said, the new economy hasn't even shifted out of first gear. Venture capitalists, who sank nearly $800million into Austin's economy last year, seem to feel the same.

But although Austin leads in high-tech growth, the region produces two jobs paying below the average income for every high-paying job it adds. And despite Mayor Kirk Watson's prediction that the upcoming "urban century" will lead to improved quality of life and greater access to global markets for all, University of California-Berkeley city and regional planning professor John D. Landis brought a more ominous message from one new urban powerhouse that no one seems to like: San Jose.

Landis said that San Jose, and California as a whole, have grown "subdivision by subdivision, not neighborhood by neighborhood." In San Jose, that has made it difficult to provide the urban comforts critical to attracting a skilled workforce. San Jose has made some progress; but can Austin do better? Landis told the Chamber that government must concentrate on long-term infrastructure planning, open spaces, and education. He later talked to the Chronicle at greater length:

Austin Chronicle: You say that in the past decade, San Jose managed to produce 3,000 units of housing, much of it affordable, in the downtown area. How did the city accomplish this?

John Landis: Our tax increment financing law enables redevelopment agencies to freeze tax assessments at current property value levels; then any [increase] in property taxes from development gets used to underwrite bonds, and those are then used to pay for infrastructure. But in California, a minimum of 20% has to go for affordable housing; cities that are very aggressive can use that.

AC: What kinds of incentives are used to attract builders?

JL: Basically, cash grants to nonprofit developers; in California, we have a lot of nonprofit developers, and these redevelopment funds are used as grants or low-interest loans to them, for any variety of costs of housing. Nothing in the approvals process is waived, so in general this housing is better than the market-rate housing. Our nonprofit housing developers are very entrepreneurial.

AC: How has the state of California contributed to San Jose's urban planning difficulties?

JL: After the passage of Proposition 13 in 1978 [which capped the state's property tax rate at 1%], it made cities want to compete with each other for the sorts of developments that generate a lot of revenues but not a lot of costs. That means every municipality wants malls and shopping centers; they don't really want housing or other things that are perceived as not paying for themselves. So [we need] some sort of statewide incentives to make sure that you [get] the housing to go with your job growth.

AC: What do local governments have to do to get developers interested in building neighborhoods instead of subdivisions?

JL: What San Jose is doing now is making land available and requiring developers to build around the light-rail system.

AC: And how do you market light rail successfully?

JL: They didn't in San Jose for a long time. The system was put in where the right-of-way was, and it brought people downtown even though most of the jobs weren't downtown. But they got the first part of it down. And then the expansion plan really focuses on expanding into the job centers. So they established that the system could work first, and the ridership was very low initially ... but now that traffic is just intolerable, they're in a position to be able to expand it.

AC: Is it better to focus redevelopment downtown or in other areas?

JL: Reuse of the downtown area is really important. Not so much for shopping centers, but for neighborhoods. We are seeing more districts pop up, chiefly in the suburbs, that are competing with downtown a little bit in terms of cultural events and housing and shopping. But we're also seeing some interest in downtown, in part because the value of the land is so great. There needs to be something attractive to get people down there. That could be housing and nightlife and culture. We thought in the Eighties it could be hotels and convention centers, but that didn't work out very well.