WHAT REVIVAL OF SAN GABRIEL VALLEY SUBURBS?

Rebuttal to “Decline and Revival of an American Suburb” by Adam Mayer

In “Decline and Revival of an American Suburb,” posted at NewGeography.com (7/23) architect and wanna-be urban planner Adam Meyer has provided an anecdotal view of moving from one suburb of Los Angeles, Pasadena, to a suburb of a suburb, Covina. http://www.newgeography.com/content/001691-the-decline-and-revival-american-suburb

Rebuttal is needed, however, to Mayer’s statements that "urban villages" will revive present-day San Gabriel Valley and that San Gabriel Valley smog abated only after catalytic converters were mandated on cars.  Such devices certainly improved air quality.  But what made the most dramatic improvement in air quality was the California Energy Crisis of 2001, which was, and continues to be, almost universally misunderstood.

The California Energy Crisis was about running out of clean air, not running out of electricity.  In the mid 1990’s, the EPA mandated California to clean up its bad air quality or risk having Federal highway and school funds cut off by 2001. According to the online chronology of air quality in California compiled by the Air Resources Board, the first two-way catalytic converters came into use as part of the ARB’s Motor Vehicle Emission Control Program in 1975. But the visual improvement of air quality was modest at best and was not visually observable.  See:

http://www.arb.ca.gov/html/brochure/

The only way to achieve a dramatic improvement in air quality in the Los Angeles Basin was to mothball or modernize all the old polluting coastal fossil fuel power plants in California.  But a problem arose: who was going to pay for the stranded debt - the unpaid bonds or mortgages - on all those old, dirty power plants? The Energy Crisis was a financial crisis involving a game of political hot potato of who was going to pay off the old bonds more than it was a lack of electrons from a lack of building new power plants.  

Was the proposed deregulated electricity market magically going to pay for the stranded debt as part of the more competitive price of electricity from so-called deregulation?  Were the stock and bond investors of the regulated monopoly electric utility companies, Edison, PG&E and SDG&E, going to suck it up and pay for it, which would have resulted in a bond market default crisis?  Or were politicians going to ante up and pay for it thus risking their political careers?  This was a political crisis even more than an energy or debt crisis.

The first policy attempted was electricity deregulation, which failed. Deregulation was an attempt to inject competition into the electric grid hoping for, say, a 20% or greater reduction in electricity bills.  A portion of this cost savings, maybe about 10%, would go toward paying off the bonds on the mothballed or modernized power plants and the other savings would go to utility customers. Deregulation failed not so much from Enron gaming the system as widely believed by the media but by the newly elected Democratic-Party legislature and then new governor - Gray Davis - pulling the plug on it for fear of resulting in greater dependence on cheap imported electricity (from the Republican states of Texas, Arizona and Utah). 

The second mostly obscured policy attempted by Gov. Davis and the Democratic legislature was to intentionally create a pricing fever that would pay off the bonds on the old polluting power plants. Putting caps on the retail price of electricity induced a pricing fever just as a doctor may induce a fever to cure a patient of infection.  Energy policy makers took their cue from the ancient physician Parmenides who wrote: “give me a chance to create a fever and I will cure any disease.”

This shifted the burden of paying off the bonds on the old dirty power plants to the public utilities (Edison, PG&E, SDG&E), which effectively went bankrupt by intentional regulatory policy. This is what we experienced as the "energy crisis" with rolling blackouts and defaulting monopoly energy companies.  This also failed because price caps never succeed in the long run and, if continued, would have created a panic in the bond market.

When new Governor Schwarzenegger came into office on a recall election over the misnamed energy deregulation debacle, he folded the burden of the old corporate bonds of Edison, PG&E and SDG&E into a state-wide $40 billion bond issue to be paid off by higher priced long-term power contracts which were set to expire in 2012. 

Living in Pasadena in the winter of 2001, I noticed that suddenly, almost overnight, the smog that typically backed up against the San Gabriel Mountains, had almost disappeared.  So the undisclosed price of eradicating the visual smog in California's urban cities was $40 billion, a few traffic fatalities due to blackouts and failed traffic signals, and an uncounted number of institutions in debt due to high utilities bills. 

I was on the Energy Crisis Task Force for the Metropolitan Water District at the time and observed first hand the misunderstood role the Energy Crisis played in ridding the San Gabriel Valley of its thick blanket of smog. I wrote about it in an article titled "We Were Running Out of Sky, Not Energy, During the California Electricity Crisis."

Another background factor in the implementation of Federal air quality standards was that the outer suburbs or exurbs to the San Gabriel Valley - Fontana, Rancho Cucamonga, Upland - could not be easily marketed by new home builders until the smog was at least visually eradicated.  This set the stage for the Real Estate Bubble from 2003 to 2008 in the Inland valleys.  Ridding the Inland Empire of Los Angeles’ smog resulted in a housing boom that took off when cheap financing and reduced capital gains taxes and relaxed loan qualifying standards came into being in the mid 2000’s.   As a real estate appraiser and land economist for the Metropolitan Water District at the time, I believed that the Inland Empire housing boom would not have happened at the resulting price levels unless the smog had been visually eliminated.

Mayer believes that San Gabriel Valley, now populated by new Chinese and Hispanic immigrants, will revive by becoming suburban villages:

Instead these towns are reviving along the lines of ‘suburb as village’, building on now underutilized downtown areas with charming mid-century structures that once served as commercial hubs for their respective towns. A growing emphasis on locality, as well as a renewed interest in civic identity, may help these places find their individual character once again – even if the signs of revival may be in Mandarin or Spanish as well as English.

Apparently, architect Adam Mayer hasn’t noticed that those cities in San Gabriel Valley that have embraced the “urban village,” “smart growth,” and “inclusionary housing” concepts, such as Pasadena, Azusa, and latecomer Monrovia, are beset by growing municipal budget deficits, foreclosures, vacant downtown condos and apartments, unfinished mixed-use projects, increased water rates due to all the empty housing units not buying water, closed auto dealerships, and economic decline.  The “urban village” and “smart growth” concepts were all dependent on sub-prime loans, easy money, and the larger Real Estate Bubble that has burst.  Whether “urban villages” offer any real prospect of economic recovery remains to be seen.  Thus far it has failed miserably and resulted in a state budget deficit. 

Today, economic recovery is being promised by the same political and technocratic elites that advocated "smart growth," "urban villages," "transit-oriented housing," and "inclusionary housing." But "urban villages" attract singles, not intact families that are the economic engines of any community.  This same technocratic class, comprised of self-proclaimed urbanologists, architects, urban planners, and "green" politicians, is now promising us an economic recovery by "green power." Like Wall Street brokers who promised risk-free high returns on your investments, the technocratic planners promise us an ecological and economic utopia but ultimately will only deliver economic decline and disaster. 

If we have learned anything from the California Energy Crisis of 2001, it is to be skeptical of any social engineering that idealistically promises more net jobs than the cost to create them, lower electricity rates, a growing economy and cleaner air, whether from “energy deregulation” or “smart growth and “urban villages,” or from “green power.”  Green power may produce cleaner air, not in San Gabriel Valley, but in Utah or Arizona where all the older coal-fired and gas-fired power plants are which export electricity to California; or from solar and wind farms in the California desert, not in San Gabriel Valley.  Green power is costly redundant power and is likely to lead to the further decline, not recovery, of San Gabriel Valley.

 

 

 

 

 

Comments

[Liz]

It was very effective to use Adam Mayer's article as a vehicle for your elegant critique of the disastrous urban and "green" policies we nevertheless seem to be stuck with. And we can never hear enough the real reasons behind the 2001 Energy Crisis. One day maybe it will sink in! And of course only you would put together the inland housing boom with disappearance of visible smog that resulted from the (2001) Energy Crisis.

I think the "production" of our current class of badly educated urban planners and urbanologists and green architects and green politicians was a bad investment that should be "mothballed" like the pollution-spewing power plants!