The corporate culture of our government has been a carte blanche to keep doing what we’ve been doing. This culture implies that what we’ve been doing works.
In business, last year’s income statement is a major driver in this year’s action plan. If a product or service was profitable, then it’s nurtured and grown this year. If a deliverable creates a loss, then change is made as quickly as possible.
Because governments are focused on GDP and jobs instead of ROI, the reasons behind decisions often get muddy. Return on Investment (ROI) is quite simple. It’s just the gain from investment less the cost of investment all divided by the cost of investment. How many times over your money will be returned to you.
And yet our governments aren’t geared to think this way unless it has to do with a change from business as usual.
The ROI of Movement
The Washington Examiner reported this week that D.C.’s 37-mile streetcar network would cost $1.5 billion and spur development and increased property values by $15 billion. That works out to an ROI of 9x. If we assume a 25-year timeframe to realize the gain, we’d be talking a 36% rate of return.
When’s the last time your local government delivered those sorts of returns?
But more importantly, when’s the last time your government placed a ROI on business as usual? The ROI of building one more road to a bedroom community and strip commercial? If you’ve done it, please comment below. There are precious few.
2012 Benchmarking Report
Here’s a handy tool to help local governments out with some of the valuation involved with the ROI of Movement: 2012 Benchmarking Report for Bicycling and Walking in the United States, released this week. A few tidbits:
- Cycling and walking levels fell 66% between 1960 and 2009, while obesity levels increased by 156%.
- Percent of children who walk or bike to school fell 75% between 1960 and 2009, while childhood obesity rose 276% during that same period.
- Canadians walk or bike for 12% of daily trips. Americans are the same. Netherlands 51%; Denmark 34%.
- While biking and walking comprise 12% of all US trips and 14% of fatalities, facilities get less than 2% of US federal transportation funds.
- Cycling and walking investments return up to $11.80 for every $1 invested.
That’s an ROI of 10.8x, and often with less initial investment required than transit. And that’s before you factor in GHG impacts, which are much harder to value. It’s not clear if these returns are factoring in the $3.2 trillion that obesity will be costing us every decade, starting in 2020.
2012 Benchmarking Report for Bicycling and Walking in the United States shows active transportation is conversely proportional to obesity levels
Sustainable Street Network Principles
What about the required principles to realize the ROI of Movement? CNU released the Sustainable Street Network Principles this month, a compact guide to achieving a human-scale street network with significant returns.
“We assert that current transportation engineering addresses only limited individual components of the region’s street network. This results in a fragmented and inefficient system that fails to adequately engage the social, environmental, and economic aspirations of communities.”
These principles advocate a human-scaled urbanism, where the act of walking represents the basic unit of design. And instead of having a street just provide a transportation service, it looks to monetize governmental investment in infrastructure by choices that are “magnets for business, light industry, jobs, and economic opportunities.”
This project lays out seven principles for creating livable street networks, then talks about the six key characteristics for implementing the principles.
As always, the points where multiple modes of transportation intersect are the places that have the highest ROI of Movement. Places that thoughtfully coordinate the connections between the pedestrian, bike, transit, and car are the ones that generate the highest returns.
And why does implementing these principles matter?
Despite the $200 billion per year the US spends in transportation infrastructure, the country has higher traffic fatality rates than any developed nation. Engineering has been focused on moving cars and trucks quickly, yet transportation delays per capita has more than doubled since 1982, and the US has the highest vehicle miles traveled per capita globally. Americans spend more time in their cars than anyone on earth.
Not really the American Dream. Something isn’t working as planned.
Sustainable Street Network Principles offer policy for increasing ROI of infrastructure investments
The DNA of Place
Looking at the ROI of Movement here, we’ve been mainly talking money. But when you find a character-rich, highly valued place, you’ll also find a high quality of life and lowered environmental impacts per person.
When you dig further into what makes these places, you’ll conclude the streets are genes in the DNA of Place. Or maybe they’re even more like histones, which compact and organize DNA.
Just as DNA is essential to life and health, streets are essential to the health of our urbanism – and therefore to our economy, society and environment.
A little DNA from New Orleans. Image credit: Steve Mouzon
In old urbanism, streets are nearly as complex as the double helix of DNA. Unnaturally simplifying streets as we have over the last 65 years, into a meager selection of freeways, arterials, collectors, locals, and cul-de-sacs have put the health of cities and economies and people at risk.
Just as in complex lifeforms, urbanism isn’t easily put into a petri dish for studying one moving part at a time. But until we understand – and appropriately value – the ROI of Movement, the DNA of Place is at risk.
–Hazel Borys
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I’m really interested in any research that’s teased this out farther. For example: the ROI of developing a new town (complete with freehold single-family homes, rental apartments, and a civic town square) versus a mall. So you either arrange the retail tenants in a grid (more cost), with space for some working day customers in the offices above (more revenue) or build a big box (less cost) served mostly by weekend drive-out-and-visit (less revenue). Is there a model somewhere of that payback? And even out at the system level (cost of importing gasoline, car parts, etc.) Have New Urbanists like DPZ presented a side-by-side comparison to developers and munis of the payback timeframes and new optionality (from a vibrant town, over a stagnant mall)?
One concern I have (without thinking too far) is that governments like wasteful expenditure because they can tax it. So car-centricity means mechanics, spark plugs, new tires etc.
I’m learning by reading, so sorry if this is covered in Urban Planning 101.
Excellent piece, Hazel! Matter of fact, it’s spurring me to finish a complementary blog post I started months ago: The Speed Burden. It looks at the physical design required for high speed (turning radii, wide shoulders, wide lanes, etc.) and examines the difference in land used for transport in high-speed versus low-speed places.
Now, I’m sitting here and thinking that you have a lot of material to mine from this post as well, and that it should become the first of a series of posts looking at various aspects of the ROI of community. Maybe we could propose a BlogOff on this topic? I’m quite certain Chuck Marohn of StrongTowns would join in, as would others like Nathan Norris. What do you think?
For Neil above, few of us attended Urban Planning 101 because most of us came from other disciplines and are learning this as we go, so you’re very welcome here!
There are two fundamental flaws in the proposition.
One is that ROI, by any concoction, is predictive of anything. Rather it is a quantitative analysis of alternatives at a point in time. Projected ROI’s are rarely achieved because they too often become obsolete the day after a decision is made. They are informative, but not determinative in any meaningful way. In their worst application they give a facade of mathematical precision to otherwise flawed strategies. I suspect that the cited ROI of 36% has some serious omissions. I do not argue against developing useful numerical analysis. Rather, I caution against using facile concepts that can as easily erode credibility as build support.
The bigger issue, of which ROI application is a subset, is that alternative theories of community development are too often proposed as if they can be levitated into place without regard to the realities of the economic context into which they must fit.
Much of our sprawl is the result of a constant consolidation of economic activity (for profit and not for profit) to ‘maximize ROI’ or stretch resources across expanding need. The communities that are often conceived as a panacea to our current dysfunction are often offered with no discernible remedy to this economic context, rendering them substantially irrelevant.
To Neil’s premise that governments like wasteful spending because they can tax it, I would suggest that governments use the tools that are available to them. Give them lousy tools? You can count on lousy results.
My first selectman has no choice but to lean on property tax and development because it’s the only revenue tool the state legislators (yours and my representatives) give him. Change that, and you begin to change land use. Create meaningful regional governmental platforms, and you can begin to evolve more sensible local economies. Fail to do either of those, and you fail to evolve our developed environment.
Hazel, here’s my BlogOff response to your ROI post… I’d love to know what you think:
http://www.originalgreen.org/blog/costs-of-sprawl—the-speed.html