Austin Contrarian

Unplanned Cities (paper)

This paper by law professor David Schleicher (George Mason) is pertinent to my argument against SMDs:

Generations of scholarship on the political economy of zoning have tried to explain a world in which tony suburbs run by effective homeowner lobbies use zoning to keep out development, but big cities allow relatively untrammeled growth because of the political influence of developers. Further, this literature has assumed that, while zoning restrictions can cause "micro-misallocations" inside a metropolitan region, they cannot increase housing prices throughout a region because some of the many local governments in a region will allow development. But these theories have been overtaken by events. Over the past few decades, land use restrictions have driven up housing prices in the nation's richest and most productive regions, resulting in massive changes in where in America people live and reducing the growth rate of the economy. Further, as demand to live in them has increased, many of the nation's biggest cities have become responsible for substantial limits on development. Although developers are, in fact, among the most important players in city politics, we have not seen enough growth in the housing supply in many cities to keep prices from skyrocketing. 

This paper seeks explain these changes with a story about big city land use that places the legal regime governing land use decisions at its center. Using the tools of positive political theory, I argue that, in the absence of strong local political parties, land use law sets the voting order in local legislatures, determining policy from potentially cycling preferences. Specifically, these laws create a peculiar procedure, a form of seriatim decision-making in which the intense preferences of local residents opposed to re-zonings are privileged against more weakly-held citywide preferences for an increased housing supply. Without a party leadership to organize deals and whip votes, legislatures cannot easily make deals for generally-beneficial legislation stick. Legislators, who may have preferences for building everywhere to not building anywhere, but stronger preferences for stopping construction in their districts, “defect” as a matter of course and building is restricted everywhere. Further, the seriatim nature of local land use procedure results in a large number of "downzonings," or reductions in the ability of landowners to build "as of right", as big developers do not have an incentive to fight these changes. The cost of moving amendments through the land use process means that small developers cannot overcome the burdens imposed by downzonings, thus limiting incremental growth in the housing stock. 

Finally, the paper argues that, as land use procedure is the problem, procedural reform may provide a solution. Land use and international trade have similarly situated interest groups. Trade policy was radically changed, from a highly protectionist regime to a largely free trade one, by the introduction of procedural reforms like the Reciprocal Trade Agreements Act, adjustment assistance, and "safeguards" measures. The paper proposes changes to land use procedures that mimic these reforms. These changes would structure voting order and deal-making in local legislatures in a way that would create support for increases in the urban housing supply.

I'd call this an argument for a weak version of "ward courtesy."  The "deal" he proposes would fail in Austin due to the sizable block of voters who lack even a weak preference for an increased housing supply.

By the way, pages 18-30 is a very nice, readable introduction to the law and economics of zoning.

(Aside: My land-use professor, Robert Ellickson, features prominently in the discussion.  He was one of the first to recognize, way back in the 1970s, that the growth controls just then beginning to flourish in places like California not only make housing unaffordable, they are economically inefficient.)

(Aside to the aside:  I participated in the landlord-tenant clinic one semester, as a law student.  We represented poor tenants in New Haven, almost exclusively in eviction proceedings.  In practice, this meant going through the paperwork and finding small technicalities to force the evicting landlord to reissue notice and recommence the proceedings.  Delay offered the opportunity to extract a concession for our clients.

Thanks to the success of prior generations of students, most experienced landlords hired from a small stable of lawyers in New Haven, who charged through the nose but who didn't make stupid paperwork mistakes.  We could still usually find non-frivolous arguments to warrant a hearing, even if the loss rate was pretty high.

We had a weekly seminar as part of the clinic.  Ellickson came to speak once.  He told us that, while we had good intentions, we were just driving up housing costs for the average low-income tenant in New Haven.  We, a bunch of leftist idealists, were skeptical.  But, in retrospect, he was probably right:  in New Haven circa 1990, the standard security deposit was two full months rent.  That's a lot of liquidity for a renter, and I'm pretty confident it was due to the difficulty of evictions.  There would be a lot more people in Austin looking for housing if that was the standard here.)

 

Internet wine purchases pose a clear and present danger to Texas consumers

Example #29 that Texas, despite its reputation as a hotbed of free-market conservatism, is no such thing.  Or at least its Legislature is not.  Nor -- perhaps less surpisingly -- is its state bureaucracy:

Texas is putting a cork in wine shipments from a significant number of out-of-state retailers.

State officials have teamed up with FedEx, UPS and other shippers to ferret out wines being sent to Texas by websites that don't have proper permits.

That has prompted Wine.com and several other resellers to restrict sales to consumers in the Lone Star State.

Wine.com has 30,000 active customers statewide, CEO Rich Bergsund told the American-Statesman on Thursday. Those customers were notified via email this month that the company had halted shipments of wine to Texas.

Other sites not currently shipping wine to Texas include TheWineBuyer.com, WineBid.com, WineExpress.com and WineLibrary.com.

A law blocking the deliveries isn't new, but the Texas Alcoholic Beverage Commission has ratcheted up enforcement efforts this year.

"Anybody who is going to sell to Texans has to have a permit," TABC spokeswoman Carolyn Beck said.

You might ask, So what?  In-state retailers must get permits.  It's only fair to require out-of-state sellers to do the same.

The catch is that out-of-state sellers can't get permits:

And, right now, Beck said, there's no law enabling out-of-state resellers to obtain permits allowing them to sell wine here. "They haven't been authorized by the Legislature," she said.

In March, TABC investigators reviewed reports submitted by shipping companies and identified about 51,000 wine deliveries from 177 firms thought to be improperly sending wine to Texans, Beck said.

By June, increased TABC scrutiny had helped drop that number to about 35,000 wine shipments from 112 resellers.

TABC doesn't even try to justify this as a consumer protection measure.  And it's obviously not.  Buying wine from Wine.com poses no more threat to health and safety than buying from the local liquor store.  The only ones who benefit from such a rule are Texas wine wholesalers and retailers.  Texas consumers lose access to greater variety and lower prices as wine merchants squelch an incipient source of competition.

Alcohol peddlers are damned good at protecting their market. 

Although I'm not a libertarian by any measure, I confess that I have certain . . . tendencies.  And I think we'd all be better off if voters would presume that every permitting requirement is an anti-competitive, anti-consumer measure until the state to proves otherwise. 

Thankfully, Texas booksellers didn't have the political clout wielded by wine merchants and wholesalers when Amazon was getting off the ground back in the 1990s, else the State would have banned buying books off the internet, too.

/rant

Misinterpreting the heritage tree ordinance

As I implied here, the Planning Commission should have conducted a cost-benefit analysis before denying a permit to remove the Bowie Street heritage tree.  Under any reasonable cost-benefit analysis, the tree should go.  Ignore the environmental benefits of denser development downtown, the spillover benefits to the neighbors in a rapidly emerging downtown neighborhood, the goal of promoting a more walkable downtown.  Ignore the hit to the property owner, who must now find another buyer who almost certainly will pay him less money.

Just consider lost tax revenue.   Endeavor agreed that something eventually will be built on the property, but it will be smaller, and it won't be built by Endeavor.  Denying the tree permit will delay the development of the property.  We have a developer, today, willing and ready to move.  It could take months or years before another developer steps forward. 

Even a six month delay will cost local governments a bunch of money.  If we assume that whatever is built will have an assessed value of $100 million, then each year of delay will cost local governments more than $2 million.  Even a six-month delay -- a wildly optimistic assumption -- will cost taxpayers over $1 million.  How many people will state, on the record, that The Tree is worth $1 million?  Or, more to the point, $1 million more than the mitigation offered by the developer -- replacing the tree with 20 five-inch trees in Duncan Park, repairing and pruning stressed trees in the park, and kicking in money for a downtown tree survey?  The pecan tree is big and healthy, but otherwise nondescript; it is not fully visible from any vantage other than a driveway entrance off Bowie; it does not shade any sidewalks. 

But PC approved the tree because at least three members believed they had no choice but to deny the permit.  As they read the ordinance, the property owner was required to show that the tree prevents every reasonable use, and it is undisputed (including by the developer) that a fairly tall residential development is possible even with The Tree.

These PC members misread the ordinance. 

Sparks snark

Federal court snark.  Judge Sparks, of course, made news yesterday with a much less facetious order.

Historic lawsuit

I guess it's no surprise that the ruckus over the City's historic landmark program has sparked a lawsuit.  Mike Levy is one of the plaintiffs.  The plaintiff's petition is here.  Their lawyers, Jim George and John W. Thomas, are serious lawyers.

I'm not sure one can make a lawsuit out of Council's lax definition of "historic," but we'll see.  Levy & Co. want a court to enjoin enforcement of the City's historic landmark program.  The plaintiffs claim the city must find it "needs" to grant a tax exemption for historic preservation before it does so -- and the city does not (and, presumably, could not) make such a finding.  There's some support for their argument in the  enabling statute:  it authorizes the city to grant tax breaks if the historic site is "in need of tax relief to encourage its preservation . . . "   So the statute does require that the tax breaks be "needed."   But the tax breaks must be needed only to "encourage" preservation.  "Encourage" is a vague, wiggly word.   If a homeowner says, "I'll agree to preserve my home in perpetuity as a historic landmark if you give me a tax break," and the City does, isn't that tax break "encouraging" historic preservation?  The real beef, I think, is with Council's often frivolous landmark designations, but I'm skeptical a court will second-guess these.

This could get interesting.  The city risks being squeezeed from the other direction if it gets too stingy with tax breaks, as a commenter noted yesterday.  That makes sense, since city-initiated landmark cases are economically (if not legally) equivalent to an inverse condemnation.  

Shady Grove needs a parking variance

As I pointed out in one of my entries on the noise ordinance, some restaurants may have trouble switching to the cocktail use to get the higher decibel limit because they will have to bring themselves up to code requirements for a cocktail use.  Shady Grove is an example.  Here is its application for a variance from the parking requirements for cocktail lounges.  Kedron Touvell twitters that the application goes to the Board of Adjustment on Monday.

Obtaining a variance is no mere formality.  The applicant is supposed to meet stringent standards -- including unique hardship -- which the Board of Adjustment must enforce to avoid waiver arguments in other cases.  The BOA is subject to political pressure like any other institution, though, so my guess is it will grant the waiver.

There is much more on the permitting process and obstacles at the Austin City Permits blog.

The FTC goes after blogger endorsements

The Federal Trade Commission intends to make bloggers who endorse a product disclose freebies they receive from the product's seller.  Seriously.

The existing regulations require those endorsing a product for an advertisement to disclose a connection with the product's seller "that might materially affect the weight or credibility of the endorsement."  Being paid to endorse a product, the FTC believes, is a fact that "might materially affect" the endorsement's weight or credibility -- unless the endorser is a celebrity, whom everyone assumes is being compensated.   

But since "might materially affect the weight or credibility" is a mushy standard that could mean anything, the FTC has to use examples to show what it means.  And it intends to add paid blogger endorsements to its little menagerie of examples (FTC report pp. 84-85 (pdf)):    

Example 7.  A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. The readers of his blog are unlikely to expect that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact would likely materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge.

I don't know who tipped off the FTC attorneys to the blogosphere's existence, or what impelled him to do it, but he should be ashamed of himself.  Who was raising the hue and cry over blogger endorsements?  Who thought it was a good idea to sic an agency obsessed with balding treatments and miracle vitamins on the internet? 

Anyway, the damage is done.  The FTC attorneys have concluded that readers of these quirky and newfangled "weblogs" are entitled to the same protection from undisclosed endorsements that it guarantees TV viewers exposed to weight-loss and vitamin-supplement ads.

This is a silly regulation for many reasons.  First, the FTC can't effectively enforce its rules now for MSM advertisers.  There are just too many outlets (TV, newspapers, magazines, radio) and too many advertisers creatively gaming the rules.  The FTC can't even control specific industries.  It has been battling weight-loss and vitamin-supplement advertisers for decades.  Everyone operates at the laws' fringes; the FTC makes a rule, the weight-loss people figure out a loophole, and so on.  And so late night TV is filled with ads for all kinds of flaky weight-loss treatments.

Because the FTC struggles to regulate a few thousand MSM outlets, it has no chance of enforcing its rules among millions of blogs.  No chance at all.  Bloggers will be able to do what they want, confident in the anonymity provided by numbers.

And, second, even if the FTC could be a credible enforcer, why should it be?  I seriously doubt it will improve the reliability of blog product endorsements.  That ought to be the goal -- to improve the quality of the information floating around out there.  An undisclosed "material connection" perhaps sometimes reduces the value of the endorsement to readers. But lots of other things impair the value of endorsements.  The blogger might be an idiot, for example.  Or the blogger, while not an idiot, has bizarre, undisclosed fetishes which might make his experience just a mite atypical.  The blogger might not have done his homework on the product because he was lazy.  Or he endorsed the product because all the cool people were doing so.  In each case, the reader is likeliest to get the best information from the blogger who got the freebie.  

Third, the few, good bloggers who do provide useful information don't need regulations like this.  These are widely-read bloggers who have been around long enough to build up credibility with their readers.  Few would want to risk that credibility by failing to disclose something their readers would expect them to disclose.  And their readers might expect them to disclose a free book, meal or video game system.  Or they might simply assume the freebies and shrug.  For example, I assume Matt Yglesias and Tyler Cowen get free review copies of the books they review.  I don't believe that either will take the edge off a bad review merely because they got the book for free.  

Fourth, Google can fix any harm posed by a "tainted" endorsement in 200 milliseconds.  When deciding which video game system to buy, I can pull up my local bloggers' review,  but I can pull up a dozen others in just seconds, as well as discussion boards and professional product reviews.  There have been several widely-followed econ bloggers talking up the Kindle.  I suspect many of them got their Kindle gratis.  I don't know.  But when deciding whether to buy my kindle, I considered the possibility that their endorsements perhaps had an artificial glow.  But I also looked at the product review at Amazon (the 1* and 3* reviews are usually the most informative).  And I did other searches for blogs and  discussion boards devoted to the Kindle.  Acquiring information to counterbalance one compensated endorsement is virtually costless.  

These are four reasons why the regulations will either be impotent or pointless.  But here's the FTC's fundamental mistake:  it doesn't understand that readers' expectations depend on the background rules.  Under the current system, I don't know whether a given blogger is being compensated for an endorsement unless she discloses a connection.  If she doesn't disclose a connection, then I have to treat her endorsement with a bit of skepticism (although thorough, thoughtful reviews are good at dispelling this skepticism), and will continue to do so until I've developed trust in her blogging.  In an unregulated blogosphere, my default stance is skepticism.

Under the FTC regulation, if a blogger has an ironclad obligation to disclose freebies, then I'll expect him to disclose that he got a free copy of the product, and discount his endorsement appropriately.  If he does not disclose a connection, I'll assume that he's not being compensated.  Of course, he could be cheating, and we know the FTC will not have the resources to police this kind of misrepresentation.  In this case, the regulation's only consequence will have been too disarm me, to make me a little more gullible.

In a world without a credible threat of enforcement, we're better off in the first scenario than the second.  The FTC's existing rules for television have arguably made consumers more gullible.  They vaguely understand that the government requires commercials to be accurate.  But "accurate" is judged on a sliding scale; commercials make a lot of claims that are unlikely to be true but which "must" be true because the government is letting them appear on TV.  In the worst case, the FTC regulations increase the risk of deceptive and misleading blogposts by giving readers false assurances that they are not being misled.

One might argue that my concerns are overblown and that these regulations will be  harmless at worst.  But this is wrong.  They will cause blog clutter if nothing else.   Tyler's book reviews will come (I presume) with an asterisk and fine print at the bottom.  Food critics will have to run disclaimers at the bottom disclosing which meals were free and which weren't.  Clutter is irritating. 

And it will be particularly irritating to those of us who won't need to clutter our blogs because no one is sending us free stuff to endorse.  

H/t This Life in Austin

Equal protection for truckers

I've argued before that even if we don't congestion price I-35 for all drivers,  we should at least price the road for truckers, which will give them the incentive to take SH 130.   Some have suggested that we simply require through truckers to detour to SH 130.  Atlanta apparently does something like this.

Ben Wear put the notion of an outright ban to Carlos Lopez, the new district engineer for TxDOT's Austin division.  And I'm having trouble believing the answer.

Given all the big rigs clogging Interstate 35 through Austin and the really light traffic on the Texas 130/Texas 45 Southeast tollway loop, can't TxDOT just require trucks to use the tollways?

According to Lopez, there's no state or federal statute that says TxDOT can't do that. On the other hand, there's no state statute saying specifically that it can. Which would seem to leave the way open for something of that order to occur, assuming that the Legislature (over what would likely be fierce opposition from the trucking industry) decided to pass a law like that.

However, TxDOT lawyers say such a statute would probably run afoul of the equal protection clause of the 14th Amendment to the U.S. Constitution. That clause says that no state shall "deny to any person within its jurisdiction the equal protection of the laws."

Truckers could make the argument that making them pay to pass through the Austin area while letting everyone else drive free would violate that clause.

Now I admit I haven't done any legal research here.  But I'm pretty confident truckers won't have an equal protection claim.  Laws treat people differently all the time.  That's the essence of law.  The courts have understood this for a long, long time, and therefore have limited equal protection challenges to laws based on a suspect classification like race or a quasi-suspect classification like sex.  Hence a law that discriminates between whites and African Americans will violate African Americans' right to equal protection unless the law is narrowly tailored to serve a compelling government interest and there is no other way for the government to accomplish this compelling interest.  This is an essentially impossible standard to meet.  Off the top of my head, I can't name any instances approved by the courts.   Quasi-suspect classifications -- those based on sex, for example -- are not subject to quite as demanding an analsyis, but court treat these skeptically, too.

But if a law does not discriminate on the basis of a suspect classification, then  courts will uphold the law as long as it is "rationally related" to a legitimate government interest.  This is con-law speak for, "Congress [or state], do whatever you want to do."  

Truckers are not a suspect classification.  We impose all kinds of unique regulations on them.  The Texas Legislature or any other government can treat truckers differently than ordinary drivers as long as the rules have a rational basis.  

The basis for a ban here is obvious and sensible.  Trucks cause more congestion than cars.  They take up at least twice as much space, and they stop and start more slowly.  Moving the tractor-trailers to another road would ease congestion.  The state has a legitimate interest in clearing congesiton.  Truckers are the most logical place to start. 

The truckers' better objection is practical rather than legal.  As Lopez points out, many trucks are not passing through.  We want trucks making local deliveries to use  efficient routes, including I-35 when necessary.  But this means our ban would have to distinguish between local traffic and through traffic.  I'm not sure how the highway patrol could enforce that.  

The best solution, of course, is to charge truckers to drive on I-35.  Through trucks would have the incentive to switch to SH 130.  Locals would not.  We'd get the optimal result with minimal enforcement costs.  Funny how prices work.

No finish line

Most of the recent discussion of the outdoor music venue ordinances by me and others has focused on the obstacles they set for restaurants like Shady Grove.  But the ordinances' more long-lasting impact will be the change to the permitting process. 

Before the new ordinances were enacted, eligible venues were entitled to an outdoor music venue permit as a matter of right.  Outdoor music venues must now obtain the discretionary approval of a city functionary.  The ordinance directs the city official to consider factors such as neighbor complaints, proximity to other uses and noise mitigation efforts.  Neighbors and neighborhood associations are entitled to notice and the chance to voice their opinions.  Every existing outdoor music venue will have to run this gauntlet when it seeks its next permit renewal.

But, perhaps more importantly, every outdoor music venue will have to run this gauntlet every year.  The new ordinance does not grant venues an automatic renewal.  A venue will need a discretionary permit in year one, year two and year 20.  There is no finish line it can cross to declare victory. 

Theoretically, a music venue could obtain a permit renewal for five years straight but, thanks to continuing neighborhood pressure, be refused a permit in year six.  Nothing necessarily would have to change:  it might play the same kind of music, to the same crowds, during the same hours, with no violations of the decibel limits.

Now, I hope city staff will administer this thing consistently.  It should allow outdoor music venues that receive a permit in year one to receive a more or less automatic renewal in later years unless it violates the noise limits or there is some significant change in the neighborhood.  But no matter what city staff does, the permitting process is now an intrinsically political one.  Venues which draw opposition in year one will, more than likely, draw opposition in years two, three and four.

A likely (and perhaps intended) consequence of this ordinance will be to deter applications for new venues.  Making the up-front investment will be less attractive if the venue's right to operate will require annual, discretionary (and intrincially political) approval.

Update and clarification on the music ordinance

I think I got the basic analysis of the outdoor music venue ordinance right.  But a couple of issues deserve more discussion.

First, I pointed out that unless a property is zoned for cocktail lounge, a restaurant will have to apply to rezone the property to switch its classification to a cocktail lounge. Cocktail lounges are allowed (conditionally) in CS-1 districts, which are rare, but they are also allowed in the CBD and DMU districts. These include both downtown and most of Barton Springs (including Shady Grove). I didn't mention the CBD or DMU districts before.   Shady Grove will not have to seek a rezoning because it is zoned DMU.  Restaurants along South Lamar, South Congress and other streets not within these three districts will need to seek rezonings.

But, second, the cocktail lounge reclassification will itself be more onerous than I indicated.   The Chronicle (h/t M1EK), on April 24 and again today, points out the cocktail lounges are conditional uses in CS-1, DMU and CBD districts. This is a big deal, since restaurants will now have to go through the conditional-use permitting process, including a trip to the Planning Commission. Furthermore, I believe they will have to submit site plans and comply with all code requirements enacted since they obtained their initial use permits, including parking, compatibility, setbacks, etc.   This may be an insurmountable hurdle for venues that have been around for 20 or 30 years.  Rather than being a minor, administrative matter, a reclassification will be time-consuming, expensive and fraught with uncertainty.

Finally, as I pointed out, it is not at all clear that these restaurants even meet the definition of a cocktail lounge.  The sale of alcohol for on-premises consumption is an accessory use for a restaurant.  It is a principal use for cocktail lounges.  Can city staff reclassify alcohol sales from accessory to principal use without any change in the mix of food and alcohol sales?

When I posed this question to Jeff Jack on the ANC listserve, he replied, "I suspect that what we will see is, at least in this case, is the interpretation by staff allowing food sales, no matter how much of a percentage of the total sales, to be an accessory use to a cocktail lounge. this only makes since selling more food at a bar is a good thing from the perspective of limiting alcohol abuse and it's related problems for which the code distinction was created."

City staff may be pressured to adopt this interpretation.  If it does not, then restaurants will have an incentive to push alcohol sales and curb food sales -- which would certainly be an unintended and harmful consequence of the new ordinances.  I don't know have far staff can go with this, since it has to worry about the consistency of its treatment of "accessory use" with other uses.  In other words, if it treats food sales as an accessory use even though they comprise 80% of gross revenue, it might have to liberalize its definition of accessory use for other, unrelated uses.

As I said before, this last issue is a murky one.  We won't really know the answer until staff tells us.