Ontario Hydro vs. Michigan Coal: A Cross-Border Perspective on Energy Policy

Michigan’s neighboring state, also known as the Canadian province of Ontario, has been struggling for months with untenable increases in electric rates (what they call “hydro”). It’s gotten so bad that citizens have started organizing protests about bills. Let’s chew on that for a minute: citizens protesting the high cost of energy.

In Michigan, it’s been an uphill battle for me to convince real estate professionals that it’s even worth building to code with regard to insulation and air sealing, industry standard things that people here don’t seem to really believe in. Lansing is lax about commercial code, which is stuck in 2007 ASHRAE, and Detroit simply disregards state law, refusing to enforce IECC 2015, which was adopted formally in February 2016. (This may be a product of BSEED being grossly understaffed). Code noncompliance drives utility bills through the roof, which makes it harder for people to afford rent. Intuitive, right? But people are totally cool with it. One of my co-conspirators and colleagues, Kevin McNeely, jokes that code is the minimum standard necessary if you don’t want to go to jail. Some gems I’ve gotten on the topic of energy and energy bills:

“These people are going to be happy to have a roof overhead,” a union-appointed consultant from the illustrious Shelby Township with the AFL-CIO project told me. “They don’t need all this insulation crap. Trust me, I know. I’ve built hundreds of houses.”

“That’s just not something that’s important to us,” a Detroit nonprofit executive said, when I pitched the portion of my construction and design standards guide outlining the need for R49 insulation and air sealing to 6.0 ACH50, which would lower utility bills and make homes more affordable for low-income homeowners. He continued, “it makes the project unaffordable.” (Plot twist: It doesn’t.)

A commercial landlord shot down my proposal of plugging a gaping hole in the building envelope at my old office. “People here view it as a sunk cost that they’re going to have to pay for anyway, so it’s not worth us spending our money to reduce their costs.” But they had Nest thermostats, so we’re cool. And the property manager of that space told me: “Well, it’ll be spring soon.”

I can’t quite trace the origins of the self-imposed martyrdom that Americans– maybe more specifically Michiganders- embrace when it comes to the complete lack of interest in conservation and complete resignation to literally sending money up a flue pipe. Then again, Detroit’s a weird place. So I was interested in trying to understand some background about energy culture in Ontario.

(Photo by Dave Abel of the Toronto Sun. November 23, 2016.) “My head hertz because of these hydro bills”– ‘A’ for cleverness on that one!

First, some education for Michiganders who, despite having lived next door to Canada for their whole lives, have only ever been to Windsor once to get drunk when they were 19 and remain largely unfamiliar with the most populous province of America’s Hat: Ontario can be described as comparable to a cross between Pennsylvania, Ohio, and New York State– it hosts the country’s largest city, which Canadians both love and love to hate, it’s got a pleasant mixture of rolling hills, fertile plains along the Great Lakes, Drake, and an expansive Up North that goes on approximately forever (about 15% larger than Texas). It’s got highly urbanized and industrialized corridors with extensive highway and rail infrastructure, and has the largest GDP of any province (oddly not the highest GDP per capita, though, distinctions that fall to Alberta and the Northwest Territories, but that’s a story for another day). The 401, as it is called, is sort of a spiritual hybrid of I-95 and a Midwestern I-80/90.

Canadians refer to electric rates as “hydro” because of the historical widespread prevalence of hydroelectric power. Indulge me for a moment and let’s go on a historical journey to unpack that:

Canada’s First Stamp in 1851, featuring the crown, the beaver, flowing waters, flowers (Ontario’s own trillium, maybe?)– and, even, the man in the moon, center right, politely looking on.

A 1901 US stamp honouring (you see what I did there) the Pan-American “Fast Express.” Soot, you will note, is less idyllic than our pleasant beaver friend.

 

 

 

 

 

 

 

 

Water is ingrained in the Canadian mythos since forever. While the American pioneer travels west in a covered wagon ‘cross the plains, the Canadian voyageur paddles in a canoe. The American bald eagle soars over the golden prairie while the Canadian beaver beaves in a pristine lake. Canada has a hundred trillion lakes and 7-20% of the world’s fresh water, depending on how you quantify. So, naturally, Canadians are proud of what they’ve got and want to conserve it. A fictional twofer that profoundly illustrates both the classically Canadian inferiority/paranoia complex (about big brother America) and the country’s pride in its water is the 2004 Gemini-nominated, made-for-CBC miniseries H2O, in which the United States essentially annexes Canada to takes it water (and whose main protagonist/antagonist/antihero bears a kind of ridiculous narrative similarity to Justin Trudeau).

So, hydroelectricity availability, indeed, but also water, water conservation, and therefore a culture of conservation, are part of Canadian culture that surrounds the Ontario hydro debate (I hope no Albertans read this, because Alberta, the Texas of Canada, is all about them fossil fuels, so much of this will be irrelevant). More provinces than not generate most of their power from hydroelectric. The Ontario generation mix in 2012 comprised 56.4% nuclear, 22.3% hydro, 3.0% wind, and 2.8% coal, but by 2015-2016 had shifted— zero coal, now 11% wind, 1% solar. Renewable generation expansion was a central tenet of the platform of Premier Kathleen Wynne’s government. They expanded solar through aggressive and extremely generous feed-in tariffs (which funded the development of small solar generation at an inflated rate to incentivize adoption).

The hydro crisis has been widely covered in Ontario, and widely blamed on renewable generation: Wynne’s government finally caved to Conservative Party demands to walk back $3.8bn in renewable purchasing (which will enough on your monthly bill to buy a double double and a donut at Timmy’s). Joe Warmington (some serious nominal determinism for a guy writing about energy usage) lamented “phoney green energy initiatives” in the Toronto Sun, and Lawrence Solomon blasted the “squalid provenance” of the renewable contracts, which, he alleged, amounted to corporate welfare to foreign corporations (vitriolic but not without merit).  Wynne’s government has also been mired in controversy related to the heavily-contested development of gas generation plants that began before she took office.

While I lament the complete lack of awareness Michiganders have about the issue, the Canadian media has been lousy at explaining why hydro rates are so high. Untenable increases, citizens increasing debt loads, trying to feed a family, etc., but never a great explanation of the massively complex world that is utility politics, utility financing, infrastructure. I’ve written a lot about the topic of liquidity in real estate: a nuclear power plant, for example, is a rocket ship ride toward the illiquidity end of the spectrum, costing a bazillion dollars to build, requiring a bazillion dollars to operate, and generating a crazy amount of baseload power (thanks, atoms!) and that’s why I don’t work in utility finance. You can’t flip a nuclear power plant like you can a $500 house (I sense a science fiction novel coming on). [Learn some background about baseload vs. peak load.]

Ontario’s bureaucracy is partially to blame, as a sort of Illinoisesque/New Yorkesque Large State that is nominally progressive but problematically large, and its push for progressive energy policy that has invariably driven up costs through things that the media admits is extremely difficult to understand, like the global adjustment cost, or the cap-and-trade system, that I’m fairly sure zero people understand. The socialist party blames the privatization of HydroOne for rising costs, and the Conservative Party said that we could replace cap-and-trade with a carbon tax (can you imagine this debate in the US?).

Plumes of carbon dioxide, if you believe in that, and God knows what else, drifting over the Monroe (Michigan) Coal Plant, one of the largest ever– the eleventh largest generating facility in the United States and the second-largest coal plant in the country. From Wikipedia (Wikimedia Creative Commons license).

But here’s the real kicker: Ontario’s distributed rates, which include time-of-day pricing (which normalizes usage during energy-intensive summer days and winter nights), are basically the same as Michigan’s. And, for the most part, we have pretty much the same climate (cold winters, warm summers, lake effect snow in much of Michigan and large portions of Ontario). The distribution rate works out to a different bill across the border, because the province assesses HST on hydro bills while most utility bills in the states are exempted from sales taxes.

A comparative analysis from Quebec Hydro showed that the real distributed rate is actually higher in Detroit than it is in Toronto and actually just under three times what it is in Montreal– (but fails to control for additional taxes owing to the need for uniformity in their survey, indicating that the debate may be somewhat less about generation itself and more about municipal revenue and provincial governance).

Comber Wind Farm in Essex County, very close to Detroit. You can all but see the Renaissance Center in the background. (Photo by Sharon Drummond, via Wind Power Monthly.)

DTE recently got approval to hike rates. And people are totally cool with it. At Southwest, I worked with a builder who once told me: “I used to live in a house in Palmer Park, and my utility bill was $800 a month in the winter, and I don’t think there is a single thing that I could have done to lower that bill one bit.” Unfortunately, it is simply not a thing people care about here. $200, $300 a month in bills? Let’s do it!

Although they are lethargically creeping toward increased adoption of solar, DTE notably hasn’t in the past made more than a gestural commitment toward renewables– their generation mix is a garbagefest of coal-fired generation bolstered by a nuclear baseload that is actually more coal-reliant and less nuclear-reliant than the regional (Central/Eastern Midwestern) average. Dig this drab pie chart, wherein coal is making DTEMerica Great Again:

Let’s break it down as a percentage of housing cost:

According to the USEIA, the average monthly utility bill in Michigan is $94.52, below the US national average. At the average Michigan home price of $132,300, that’s a monthly payment of $568.46 principal and interest (10% down at 4.000% over 30 years), of which 17% would be your average monthly utility bill. I don’t know about most people, but I think the notion of getting an up to 17% discount on a house (100% of that if you’re talking about a net zero home) sounds pretty good.

A clever, interactive data set from the National Post shows that even with HST taken into account, the numbers aren’t really that much worse. An average of $188.87 in Windsor-Essex— that’s about $138, which is only about 20% higher than the average US bill (and with 0% coal generation in comparison– Michiganders can take a crack at the question of whether we value that or not). And taking into account the fact that the average home price in Ontario is a whopping $518,000 (egregiously skewed by the rampant clusterfuck of speculation that is the Toronto market), that number looks even smaller as a percentage of the total monthly expense (TO’s regionally adjusted $205.81 out of $2,225.71 a month P&I works out to 9.2% of the monthly cost, in comparison).

Where the stats become absolutely insane is when you look specifically at Detroit. Cut that home price by two thirds and keep the utility bill the same (realistically, increase it, given the degradation of low-income housing in the city, but DTE isn’t exactly all about the open data), and compare to Ontario:

So, in essence, Detroiters could be paying well over 56.41% of their monthly housing payment to utility bills, but we’re fine with that, while our neighbors across the border have in only a couple of years successfully organized a protest movement that has effected the province refinancing its long-term utility debt in order to lower bills.

I can’t speak for the half dozen people who read this blog, nor for the entirety of the Mitten, but I would gladly pay more for electricity if it resulted in cleaner air instead of the filthy air we are relegated to breathing in Southeast Michigan. Or if it resulted in cleaner air, and DTE wasn’t pulling in three quarters of a billion dollars in profit while still upping rates. Or increased resiliency of the grid: CBC reported that the March 2017 windstorm that left thousands of Southwestern Ontarians without power took days longer to fix in Michigan, where about three quarters of a million people were without power for days, owing largely to DTE’s agéd grid (while Ontarians have to choose between feeding their families and paying their hydro bills, we have to choose between $750 million in corporate profits and having modern, resilient infrastructure).

Maybe, in the meantime until we figure out that complicated debate (for example, we wouldn’t want to kick major Detroit polluter US Steel while they’re down), we can remain attentive to the Ontario conversation and figure out ways we can work toward that same culture of energy conservation– which ends up being a value-add for public health and a massive savings in operating capital, whether for households or for businesses. Capital markets are already retooling to accommodate less government subsidy and decreased installation prices in an era with less government green and more demand for green energy– now it’s time to retool our culture in how we think about energy.

Die Handgemachte Stadt Tours Sustainable Urban Infrastructure in Germany

I am pleased to announce that I have been selected to attend the Ecologic Institute’s Post-Carbon Cities of Tomorrow (POCACITO) program this June in Germany to tour the country’s model projects for sustainability, energy, and urban innovation. We will be headed to the port city of Hamburg in the north, followed by a trip to the Ruhrgebiet, a formerly heavily industrialized area that hosted plentiful coal mining and steel production and has had to cope with massive job losses as industry retools and heavy industry is shipped eastward (I suppose it’s not “overseas” when China is on an adjacent, if not very far away, land mass).

Ecologic is a DC-based policy and research organization that fosters international exchange on topics of sustainability and has hosted forums on Arctic policy, urban planning, climate, land use, security, and other subjects, and also produces the POCACITO program in partnership with a range of European and international organizations including Aarhus University, the Centre for European Policy Studies, the Leibniz Institute for Regional Development and Structural Planning, and others.

I will be gone for the better part of two weeks (which includes what I can safely call a much-needed vacation down to Stuttgart to visit some friends, one of whom I know from the GAAP exchange program I did in high school) and hope to post from Germany. 

Mach’s gut, y’all.

That Dude Who Voted No On My Zoning Proposal Is Now In Jail And Schadenfreude Is Real

In a scenario worthy of the Duma or a small, post-colonial African republic, newly reëlected East Chicago city councilman Robert Battle, who once shot down a zoning proposal I had to create six market rate rentals in a disinvested block in the middle of town, took the oath of office from a jail cell in Porter County, Indiana last week.

I couldn’t make this up. And the Hoosier State is oddly cool with it:

“Indiana law permits Battle to hold his seat – and collect the $42,365 salary that it pays – until he resigns, admits his guilt on any of the charges or is found guilty in court. Battle, a Democrat, ran unopposed in November and received 308 votes.”

So, a whopping 1% of the 29,968 residents in East Chicago, voted to keep the dude in office even after his arrest last September— well in advance of the November election.

Now, I would not grant Mr. Battle the distinction of being an honorable sort of hustler, but East Chicago has a rich history of flaunting the law going back to Prohibition, when its mayor and chief of police were forced to resign after being caught dealing in bootleg liquor. Former Mayor George Pabey was in 2011 sentenced to five years in jail for fraud and conspiracy, pilfering funds while the city was in fiscal freefall. (I would like to think they have taken a leaf out of Illinois’ book, though they are in the law-abiding state of Indiana).

So how did I fall victim to this same trend of municipal dysfunction?

For the sake of story, let’s go way back, for the sake of some historical understanding here:

I was, for a time, co-owner of a building in the funny little industrial city sandwiched between Hammond and something (Gary, maybe, but no one is really sure– the industrial and periurban landscape betrays sensibilities of centeredness or place). For anyone unfamiliar with the town (and that’s most of you), it tells a story similar to other my other Rust Belt favorites of the almost identically-sized city of McKeesport (1930-1960 decennial populations hovered around the mid 50’s) or Gary.

Forget the history of municipal dysfunction– the city has a rich history of industry– something often missed in our quests to quickly get through the place on Cline Avenue while escaping a traffic jam on the Borman Expressway. Built around the Indiana Harbor, essentially an entire city of steel mills located right on Lake Michigan, today joining peer industrial behemoths like BP’s Whiting Refinery, US Steel’s Gary Works, and, formerly, Chicago’s South Shore Works, East Chicago was at one time called the “Twin City,” defined by an East Side (East Works, 1901) and a West Side (West Works, 1923, Youngstown Sheet and Tube).

Inland Steel stopped being a thing in 1998 and ended up being acquired by Ispat, later Mittal, later, ArcelorMittal which, along with US Steel, continue to profitably operate plants in the Harbor. Arcelor actually won some awards for installing a gas capture system at the giant blast furnace that is still in operation—to give you an idea of how giant the operation is, a steam turbine burning a portion of the 22% of the gas from the furnace that isn’t already recaptured would create enough electricity to power 30,000 homes, or, the entire city of East Chicago. That’s pretty sweet.

Indiana Harbor, looking north toward Lake Michigan, probably from central East Chicago. File photo from the NWI Times.

So, though perhaps forgotten in the collective consciousness of much of Chicago proper, Indiana Harbor still hosts a handful of huge employers and is probably the largest single-use (industrial) district in these United States (the aforementioned blast furnace remains the largest in the US). The working class city itself, with a poverty rate over 20%, is racially diverse, almost equal thirds white, black, and Latino. It also is home to the Marktown Historic District, which is surrounded entirely by the expansive BP Whiting Refinery and steel mill facilities, the former of which continues to jockey to acquire the remaining occupied houses and demolish them to build… more refinery?

Back to 2013: At various points I have made references to changing out of work boots into dress shoes. I did this for the first time when I went from supervising renovations of a few homes on Gary’s east side to the East Chicago Board of Zoning Appeals. I got some odd looks from passersby, changing in the parking lot to avoid being spotted by the Board—but made it to the meeting on time.

Handbuilt had with its private equity partners bought the largely intact, eight-unit building and had a budget to downsize it into six units so that two units could be larger and there could be a common area for storage.

Problem is, East Chicago’s patchwork of R1 and R1a zoning, which would have allowed, through grandfathering, the higher density, required a variance because the building had been vacant. I deduced, based on the fact that few of the zoning maps indicated higher density in the city’s majority single-family housing landscape, that

Piece of cake, though, I thought—the only tenant creating any traffic on that corner was a Church of God In Christ, and the rest of the area was single family houses.

I spent $600 to serve notice of the zoning appeal to residents within a stone’s throw per the city requirements. I came armed with drawings, courtesy of the talented designer and urbanist Sam Wesselman, who was at that point interning with Handbuilt working on our law-related services. The drawings, neatly packaged in a several-page booklet, talked up the high-efficiency furnaces, double-glazed windows, insulation retrofit, the clever, modern kitchens, this many jobs created, blah blah blah.

I did a traffic study and tracked the number of parking spaces available during the workday and in the evening. I mapped it over time, and I measured everything on Google to make sure I was adhering to best practices for parking planning.

It was a slaughter. Not much of a Battle, certainly. I was one of two applicants, the other of which was a local entrepreneur who had bought a very similar mixed-use building about a block away from mine and was applying for a variance that would let him open a barbershop in the first floor space.

I presented, and the hearing went something like this:

“What about parking?”

“What about parking?” I asked.

“There’s a church across the street. Parishioners are going to have a hard time finding parking if you have six new apartments where everyone has their own car. You might have an additional ten or twenty cars on that corner.”

(Ten or twenty cars– for six apartments?)

An older Mexican man who spoke timidly through an interpreter about concerns over parking looked as though maybe one of the councilmen had come to his house and threatened to write him a ticket for an invented infraction if he didn’t come to help drive a nail in the coffin of these two proposals.

Okay, so, parking.

“What about trash?”

“Well, there is going to be a dumpster out back, here, which would be provided by us, per the city’s regulations for multi-family buildings…”

“Yes, but these are renters. Who is to say that they’re going to take care of their trash?”

“Sir, I’m a renter—I take out the trash myself and put it in the bin.”

The barbershop did not fare better. The owner came with his attorney, a slick but well-dressed young man. The man presented about realizing his dream– to cut hair and activate a vacant community space. But there were questions. The barbershop might bring in riffraff, one councilperson expressed. My favorite response was one that indicated the profound entrenchedness that seemed to summarize my experience:

“I been knowing Chris since forever,” a councilwoman said, “so it’s just really a shame that we have no choice but to deny his petition.”

Essentially, she was saying, no matter how “in” one got with the powers that be, there was no fighting inevitability. Nothing could change. I tried to make the case for renovating a vacant building that had been derelict for years, the site of illegal dumping and unsavory activity.

“It’s a shame, but this city was built when we needed different things,” chairman Lenny Franciski  of the 2nd District had told me, self-assuredly, launching into an explanation of how these homeowners worked hard so they could own their own home, and they didn’t want renters (“those people”) on the block. “You know, it might have worked for an eight unit building to be there back in the day, but that’s just not what we want in our city now.”

I had the audacity to ask him what they wanted there instead.

“Well, the city could demolish it.”

At public expense. Good night.

Unanimous no vote, and Mr. Battle grinned dimly.

Well, whatever– that guy’s in jail now.

As I was leaving the meeting, understandably bummed out, an older, bespectacled black man in a USW jacket put his hand on my shoulder and said, “Welcome to East Chicago, buddy. Sorry it didn’t work out for you.” I said thanks. “I guess you’re learning how folks think they have to do business around here,” he said with a grin.

I’m not going to give up working in challenging municipalities like this, because they all have value, and a lot of that value involves recognizing a careful balance of the value of their history, their human capital and social capital, and their affordability for new development. But I will say this: There are reasons why some distressed municipalities figure out solutions and other ones don’t.

Things that could have been.

Making Michigan Transit Work: Coming Soon, or a Pipe Dream?

Pere Marquette trains that ran between Detroit and Grand Rapids between 1947-1963.

Detroit has a reputation of being pretty weak on public transit, and it’s not undeserved. Southeast Michigan in general is, predictably, heavily dependent upon automobiles, with fixtures like the peculiar Michigan Left dominating inexplicably expansive thoroughfares that traverse sparsely populated suburban areas and the barely-denser city of Detroit alike. A dysfunctional regional transit system in metro Detroit is plagued by the ability of municipalities to opt out of funding and participation. Put all together, the systems just don’t work right, as evidenced by the Detroit Walking Man sob story, or by, well, living here.

Michigan is currently embroiled in a debate over how to fix pothole-plagued roads, currently through a proposed 15-cent gas tax hike that looks like it will pass in spite of the fact that it cuts the state Earned Income Tax Credit to working poor families and penalizes fuel-efficient car owners. The new proposal requires the state to reallocate $700 million in current revenue exclusively toward road repair and construction. The state has failed to take into account some revenue-producing option that would either 1) index the gas tax to inflation, 2) include a vehicle miles traveled (VMT) tax as an alternative or a supplement (imperfect though that may be), or 3) fund any sort of public transit in addition to the hundreds of millions to be spent on highways. This follows the failure of Proposition 1, which would have more equitably redistributed funds but still provided no support for public transit infrastructure.

But alternatives are coming, and they might not all garner the same ridicule that locals often hurl at the M-1 Woodward rail line, which I’ve heard on more than a few occasions referred to as the “train to nowhere.” A 3.3 mile light rail line along Woodward, the line will make intermodal connections along one of the busiest urban street routes within the most densely populated urban core of a metro area of 4.2 million. Somehow, standing in the middle of Campus Martius, I’m not entirely sure how the surrounding office towers constitute “nowhere,” but I’m sure someone has thought up a clever answer. While the original plan was to extend the line to 8 Mile, the current, shortened line terminates in New Center, home of Shinola, the College for Creative Studies, and a coming tsunami of gentrification. It is unclear whether the line will ever be extended (Woodward goes the whole way to the metropolis of Pontiac through the likes of Ferndale, Royal Oak, Birmingham, and Bloomfield Hills, but no one can agree on money and proponents think that the federal government would have to kick in beaucoup bucks for it), but meanwhile, many have their doubts, with a generation-long public transit drought in the Motor City.

S03-MC_220

Photo from M-1 Rail.

The urbanist snark echo chamber has their own feelings about light rail, crying that they’re not economical enough, that BRT is cheaper, and that we should privatize the entire universe because obviously Uber will fix everything and because #markets. There are benefits to either BRT or LRT, but there doesn’t seem to be consensus about the best long-term option.

The interesting and less-discussed options in the works are improvements to the Amtrak route as well as the proposed SEMCOG and WALLY routes. Amtrak trains chug along at a leisurely pace between Detroit and Ann Arbor, taking about an hour to travel thirty-some miles, even though the railroad began upgrading the tracks in 2013 in a process that still appears to be ongoing but has reduced the travel time substantially from what used to be close to seven hours for a 200-some mile trip (speeds are up to 115 mph on some sections). Speeds between Michigan City and roughly Ann Arbor are actually pretty fast, but the disaster of Chicago’s rail network slows down the approach to the city and won’t be fixed any time soon.

WALLY, the Washtenaw-Livingston line, is a proposed 27-mile route between Howell and Ann Arbor intended to ease congestion on US-23, which I frequently find myself driving during rush hour (it isn’t pretty). And the Ann Arbor to Detroit route proposed by SEMCOG joins WALLY in proposals that have languished for years since people decided they might actually be a solid idea. It’s unfortunately clear that, especially given recent cuts by Congressional Republicans, Amtrak simply doesn’t have the funding to add their own trains, even though this would prevent the duplication of an existing, though slow, route. SEMCOG’s own efforts for MITrain are hampered by the fact that the rail network is owned by profitable freight railroads who don’t have a track record of playing well with passenger transit (and whose idea of “intermodal” is “shipping containers delivered efficiently through expensive infrastructure“), so the project remains up in the air in spite of the fact that they’ve acquired, refurbished, and tested rail cars on the route.

Slow though it may be, it looks like Detroit is adapting to a more modern paradigm after a generation of exclusively car-dominated transit infrastructure. “They think that monorail is gonna change the neighborhood,” my mechanic in Milwaukee Junction said to me this morning, shaking his head after replacing my rear shocks, well-worn from a disastrous affair with Rust Belt street grids. “I guess we’ll find out.” Meanwhile, the Detroit News reports that a Detroit to Grand Rapids line like the original Pere Marquette could be reinstated… some time in the next ten years. Fingers crossed that it won’t take that long.

Highlighting Detroit’s Sustainable Community Development Projects

 

McGregor Hall, the characteristically angular Minoru Yamasaki masterpiece of marble and glass.

McGregor Hall, the characteristically angular Minoru Yamasaki masterpiece of marble and glass on the campus of Detroit’s Wayne State University.

“We often hear about how it’s great to get like-minded people together in the same place,” one USGBC-DRC member said in a lunch conversation, “when, in reality, preaching to the choir is about the last thing we need for sustainability. We need to start reaching out to people who aren’t on board.”

This statement resounded in the theme of Monday and Tuesday’s conference, the DCAC Business and Institution Sustainability Summit produced by the Detroit Climate Action Collaborative (DCAC), a sub-acronym of Detroiters Working for Environmental Justice (DWEJ), a Midtown Detroit-based organization working in the intersection of sustainability, community development, and social justice. The conference brought together the likes of business and sustainability professionals, policy experts, students, and entrepreneurs.

Breakout sessions tasked diverse groups of attendees to tackle specific tasks: 1) Reducing Greenhouse Gas Emissions; 2) Creating Resilient Businesses; 3) Developing Public Policy; 4) Preserving and Conserving Water and Water Quality; and 5) Growing a Green Culture in Detroit. Tough questions were asked in sessions that brought community champions of environmental justice into the same rooms as corporate executives. In one introduction during a panel session, the moderator maintained congeniality and wit while taking no hostages:

“I run a company that recycles electronics,” the audience member said, identifying himself.

“Okay,” the moderator said, nodding with a grin. “So, you’re that guy who sends all of this toxic e-Waste to be sorted by poor people in Ghana or who-knows-where to turn a profit off some scrap gold?”

Over the course of sessions, each moderated quite differently, we honed some specific strategies to be presented later in the day, and each moderator brought a different perspective. George Davis, Manager of Public Safety and Public Affairs for the Detroit Salt Company, which still to this day mines salt from the deposits beneath the river (check out some more great history here), pointed out that Michigan’s industrial ingenuity originated in large part from the historical exploration of its natural resources, like iron in the Upper Peninsula, and this historical legacy can help inform entrepreneurial innovation in environmentalism and sustainability.

Lunch was punctuated by a keynote speech by John Viera, Global Director of Sustainability for Ford Motor Company, introduced by Dominic DiCicco, also of Ford, who covered Ford’s sustainability program. After an afternoon session of planning and a chance to visit some of the exhibitors including USGBC and various energy services companies like Walker-Miller Energy Services.

Environmental Justice & Sustainable Development Tour

The second day included a four-hour tour of Detroit, covering sites significant to environmental justice and sustainable redevelopment. We began at Socra Tea in the basement of 71 Garfield, where we enjoyed fresh scones and a tour by Diane Van Buren of Zachary and Associates, which developed the project. The building, which was renovated from a partially burned out shell in 2010, now hosts an advanced geothermal glycol loop system to provide heating and cooling and offsets its energy usage with a– drum roll- Solyndra photovoltaic system on the roof. Van Buren remembered the Woodward Avenue corridor of the 1990’s, where, while attempting to secure financing for a similar redevelopment project, bankers would all but laugh her out of the room. “They said, ‘No one will live on Woodward!'” she recalled. The corridor, where rents are now topping a dollar a foot, now offers hundreds of new construction and renovated housing units and is getting a streetcar line. Times change. The banking sector changes, too– very slowly.)

We then drove over by the Detroit Incinerator, a 68MW municipal waste-to-energy plant that provides electricity and district heat to the downtown. The plant was built in the 1980’s by a city in freefall that hoped it would be an economic development miracle, but most blame for poor air quality and the economic challenge of municipal recycling (why recycle when dumping fees are so low?). Ahmina Maxey, of Zero Waste Detroit, met us for a brief chat on the bus about the incinerator. Zero Waste Detroit is a coalition of local organizations interested in advancing recycling and better solid waste disposal options in a city that literally burns trash for heat.

 

Leila Mekias (DCAC, right) and Nat Zorach (The Handbuilt City) at the Riverfront.

Leila Mekias (DCAC, right) and Nat Zorach (The Handbuilt City) at the Riverfront.

We then went for a walk down to the Riverfront, where we met with Prasad Gullapalli and Karin Viola from Srinergy, a Novi-based solar installer that developed a portion of the roof of the “new economy”-focused Elevator Building, offsetting about a third of the building’s electric load. We also strolled down along the river, past every type of Detroiter jogging, fishing, walking, and selfie-taking, passing by the Michigan Department of Natural Resources’ new Outdoor Adventure Center, which is slated to open some time this summer, and enjoyed ice cream under the concession stand’s ultramodern awning.

 

The tour group at Gabriella and Sebastian Jackson's Social Club barbershop.

The tour group at Gabriella and Sebastian Jackson’s Social Club barbershop. Sebastian Jackson (center, in jeans and striped shirt) is pictured to the immediate left of Eric Douglas, Community Organizer with DWEJ, and Kimberly Hill Knott, DWEJ Project Director. Photo credit to DWEJ’s Grace Doss.

Post Riverfront, we stopped by Social Club (not to be confused with the British rock band), Sebastian & Gabrielle Jackson’s concept barbershop on Wayne State’s campus (picture below). The space, resplendent in wood salvaged from locally deconstructed houses, is not only a business but also a community gathering space (their Facebook page notably features more pictures of events and activities than it does pictures of haircuts). Jackson collects color-untreated hair, which has a high nitrogen content, to be used as compost in local community gardens.

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Photo credit: Grace Doss (DWEJ). Pictured is the playground on PCS’s property, with DWSD wastewater treatment facility in the background.

The last stop on our Tuesday tour was at People’s Community Services in Delray, where PCS Executive Director Greg Everett and the Southwest Detroit Community Benefits Coalition Program Director Simone Sagavac introduced us to the neighborhood, a few square miles sandwiched between all manner of industrial establishments including US Steel’s Great Lakes Works plant on Zug Island, a manmade body of land that has been likened on more than one occasion to an industrial Mordor, and the Marathon Refinery. Settled around Fort Wayne in the earlier part of the 19th century, the neighborhood became a thriving nexus of raw materials processing following its development as a major railroad hub, but began to suffer in the earlier part of the 20th century from the construction of a wastewater treatment plant, a coal plant (pictured above and still in operation), and as aging, dirty industry expanded while the city’s industrial base shrank as a whole. The 2008 recession struck the neighborhood hard, as it did the rest of Detroit, and the neighborhood is struggling to recover from nearly a century of disinvestment alongside the ongoing and looming environmental problems.

When asked about any positive impacts of industry on the neighborhood, Sagavac said that while they do not have good data on the percentage of factory workers who live locally, that the gradual upskilling of the workforce means that higher-skilled jobs are necessarily higher-paying, making it easier for these workers not to live in the community, thereby contributing to a shrinking population and a shrinking tax base. The Gordie Howe Bridge (2016-2019) that will connect Detroit to the Land of the Rising Oak Leaf is expected to radically transform hundreds of acres of the neighborhood through transportation interchanges and a large customs plaza, and Sagavac is hoping for a community benefits agreement that ensures that the neighborhood can benefit from jobs and economic development created by the project.

Interested in learning more about goings-on in the Motor City’s sustainability scene? Check out DWEJ and stay tuned to hear about some upcoming work we’ll be doing together later this summer.

Up In Smoke: How LIHEAP Could (But Doesn’t) Reduce State Deficits And Carbon Footprint

WBEZ reported this morning that Illinois Governor Bruce Rauner’s deficit crusade will slash utility bill subsidies for lower-income customers through Illinois’ contribution to LIHEAP, or Low-Income Home Energy Assistance Program. Rauner’s argument in favor of cutting the $165 million in funding matching the annual federal LIHEAP grant will certainly have a major impact on the state’s troubled budget, but will more certainly have major ramifications for the poor during our current climate of stagnant wages and economic uncertainty. However, while it’s clear that Illinois can’t continue to run such staggering deficits, LIHEAP is a perfect example of a program that has become an economic default rather than a real solution to an increasingly important energy problem, and the budget cuts– some of which are inevitable at this point owing to a deadlock in the legislature- may indeed provide an opportunity to address this through a deeper conversation.

LIHEAP, a program operated by the US Department of Health and Human Services, was borne out of the energy crisis in the 1970’s. Congress wanted to create a system for value capture to ensure that major upward fluctuations in energy prices wouldn’t result in disproportionately adverse effects for the poor and so created LIHEAP from taxes on oil (meanwhile, that same energy crisis helped create movements to build super-efficient homes like Passive House). Within a few years the program added support not only for heating but also for the much more energy-intensive process of cooling a home (even though more than half of LIHEAP money goes to heating while only pennies on the dollar go to cooling). Subsidies are calculated by economic, demographic, and climate data– but kind of not, because, as shown in the table below, LIHEAP favors states with fewer heating degree days.

Region State Heating Degree Days (HDD) in 2014* Per Household Subsidy Average Subsidy (Cents Per HDD)
Midwest Illinois 6760 501.21 7.41
Ohio 6438 367.34 5.71
Missouri 5969 505.5 8.47
Michigan 8364 265.42 3.17
Minnesota 9415 733.81 7.79
Wisconsin 8715 458.77 5.26
South Florida 2058 1033.34 50.21
North Carolina 4159 993.66 23.89
Louisiana 2357 1522.38 64.59

(Balance point of 68°F HDD calculated from data collected in individual states’ capital cities.)

Funding started in 1981 at about a billion dollars and didn’t really increase appreciably until the late 2000’s, by which time the US population had increased by about 50% from its 1980 numbers, and LIHEAP, previously stagnant and not indexed to population growth, eventually caught up, ballooning to a now-typical annual range of $3-4 billion. Of that, only about 10% was used for weatherization through the REACH program and others (see Perl, 2013), a number that did not vary over time or geography, per 2012 case studies of Colorado and Florida. LIHEAP began using what they called “contingency” financing to request additional appropriations for “emergency” conditions in weather– extreme cold or heat- but this ended up being used so frequently to be meaningless, and states began to adopt their own policies to supplement the program like Illinois did. This may explain the discrepancies in funding between states.

LIHEAP funding history (from HHS).

What is not immediately clear to someone less learned in the machinations of federal bureaucracy is why LIHEAP has such substantially better funding than, say, comparable Department of Energy programs. If the state is following the 2008 numbers (referenced in the previous paragraph) in 2015, that means that its 2015 request for a DoE weatherization grant is about equal to the amount the state kicks in for weatherization from its LIHEAP funding, even at that mere 10%. Steve Savage with Illinois’ Department of Commerce and Economic Opportunity (DCEO) could not be immediately reached for comment.

The Urban Weatherization Initiative, separate from the LIHEAP & REACH programs, is a state-funded program in Illinois that provides retrofit and energy analysis training in nationally recognized energy standards.

As the program is administered through HHS, it is separate from Department of Energy initiatives like EnergyStar and is also separate from pools of money from Housing and Urban Development that support utility bills for Section 8 and other subsidized renters. While the alphabet soup of federal agencies increasingly involved in addressing energy issues is an important sign of the times, the facts are clear, especially based on the roughly 10%-on-weatherization figures: We are not moving toward a net zero energy model through programs like LIHEAP, and that is going to have to change unless we are okay with budget deficits.

Up In Smoke? An Economic Case and Policy Blueprint for Net Zero

Groundbreaking revelation: The first law of thermodynamics (remember? energy can’t be created or destroyed, only transferred) does not apply to money. When you pay your utility bill, that money is literally going up in smoke—coal is extracted from the ground and burned. While the poor rely on subsidies to cover part of that cost (LIHEAP may amount to a few hundred dollars a year, so it’s not paying the entirety of your bills), the government continues to send this money up in smoke– where it could be investing in energy retrofits. Since we can’t get that money back, we might as well figure out ways to reduce our footprint.

Even without financing, the math makes sense, as illustrated in this infographic from Efficiency Vermont.

At a building-by-building level, this is done through an energy retrofit. It’s also done by aggressively stepping up building code requirements, as states like California and Illinois are doing as we move toward requiring net-zero energy construction by 2020 (though I’m holding out for 2030). Reducing energy load:

1) reduces strain on public utilities (NB: extremely expensive and rapidly aging infrastructure),

2) reduces carbon footprint, and,

3) in reducing the burden on the poor of utility bills,

4) would further reduce government expenditure to subsidize these costs.

We’re not talking pennies, we’re talking the entirety of the LIHEAP budget, which some policymakers are continually pushing to increase– past the four or five billion dollar mark. The unrealistic but ultimately true reality is that, had that funding provided by LIHEAP and REACH instead been used to provide long-term financing for energy retrofits to convert housing stock to net zero energy, the program would, eventually, no longer have to provide utility bill subsidies at all. Even a fifteen-year payback on improvements would mean that money invested in 2000 would result in net zero housing stock by 2015. Of course, this is lofty considering we wouldn’t be talking about $3-4 billion in annual federal subsidy but rather many more billions– but in a one-time expenditure. (LIHEAP has cost the public $40 billion since 2003 and that’s without individual state subsidies).

Plenty of programs are already in place: PACE is already a hit in Illinois with nearly half a billion dollars of projects in the pipeline or already completed, and Michigan is languidly moving forward, too. Indiana Governor Mike Pence doesn’t seem to be able to so much as spell “energy efficiency,” and it’s not surprising that PACE hasn’t gotten off the ground there, but that’ll come, too.

Utility bills may represent an energy crisis for a low-income homeowner or renter as well as a burden on state finance, especially in the cash-strapped municipalities of the Rust Belt that are torn between continuing to run inefficient, large governments and completely doing away with programs that work at least better than the alternative of, well, letting them eat cake, as it were. But in the net zero future, programs like LIHEAP don’t exist at all– so it’s important to use instances like Bruce Rauner’s deficit crusade to ask important questions about how we can ensure that federal and state programs work together to solve a problem by creating an energy efficient built environment, not just continue to send cash up the flue pipe.

American Manufacturing’s Complicated, Fraught Comeback

I figured it was time to weigh in on the debate over Detroit-based Shinola, a company that has gotten a lot of attention as well as some seriously critical coverage in recent months, after I read Philadelphian blogger Zoe Gould’s editorial in Belt Magazine about the topic. The resurgence of “Made in USA” following consumers’ shocking realizations that there is actually some value to “buying local” has been advanced by companies eager to market that value– sometimes in an extraordinarily problematic fashion, as in the case of distressed Rust Belt cities looking for love and capital.

Gould’s article, not the first, alleges disingenuity on the part of the brand, which prides itself on manufacturing wristwatches and exorbitant bicycles in Detroit, a city known for a manufacturing legacy as well as for its truly spectacular fall from grace. Accusing the company of “profiting off the romance of poverty,” her fitting title, Gould’s unambiguous disapproval of the company cites, among other examples, a heavy-handed marketing video which, she aptly characterizes as “a cross between a tampon commercial and a senatorial campaign. White and mixed-race millenials jaunt around Detroit on multi-thousand dollar bicycles mingling with impeccably dressed black school children and old Motown singers.” (I mean, pretty much. You can see the videos here— they clearly employ a very fancy marketing team that is not terribly sensitive to the complex cultures or politics in a city like Detroit.)

Gould also refers back to Jon Moy’s scathing, thorough, and mostly spot-on critique of “Shinola as White Knight,” which castigates the company as emblematic of the boutiquization of Detroit, where, Moy points out, the per capita income is a measly $14,000 and no one can afford a damn $550 watch. Beyond the expense issue, which, Moy says, he can get down with when all is said and done, he also criticizes what he views as an insidious and colonial form of marketing– gentrification at its worst. “Instead of starting in his parent’s garage,” Moy laments, “Shinola is a trust fund kid that decided one day he wanted to start a company and had his dad buy him all the cool stuff.” But is that the point?

A Brief History of American-Made Brands in the Era of Global Economy

Moy’s personified Shinola is none other than entrepreneur Tom Kartsotis, who at age 25 founded with his brother Fossil, three decades later a $3.25 billion enterprise that makes its money by importing mid-grade watches from Chinese factories. Fossil manufactured its own vintage-styled brand and has also picked up other brands along the way, notably Chinese-made Skagen Denmark (actually an American company that has never manufactured watches in Denmark, contrary to what many of its customers may believe) and Swiss Zodiac. The firm also started manufacturing its own higher-end Swiss watches just last year. Kartsotis, who still owns a minority share of the publicly traded company, which is, to say the least, still making some bank, went on to found Bedrock Manufacturing in 2003, a venture capital and private equity firm that would go on to eventually encompass brands like Shinola and Filson.

Since these brands don’t exist independently in some sort of economic vacuum, I was curious about the degree to which Bedrock had messed with brands like Filson, which it acquired last year as Shinola was starting up. I wanted to get some sort of inside perspective from someone in the industry and I spoke with Will Morgan from David Morgan, a semi-centenarian retailer in the Seattle area that carries a number of Northwest manufacturers but dropped Filson prior to the 2012 acquisition. Filson, a manufacturer of high-end rugged outdoor and westernwear (think a Northwestern Cabela’s but more boutiquey and less NASCAR) had been previously acquired in 2005 by private equity firm Brentwood Associates, which also in 2006 also bought Allen Edmonds, probably the best-known American manufacturer of high-end men’s shoes. Morgan, who was familiar with Shinola, said that his company’s problem with Filson came not from the Bedrock acquisition but from the Brentwood acquisition and cited 2005-era Filson’s emphasis on what he termed a “department store model,” a “churning” of fashionable, imported, seasonally varying designs– with the accompanying emphasis on frequent and bountiful sales.

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In today’s economy it is almost impossible to distinguish the purely aesthetic hipster culture of banal consumption from one that actually places substantial value on American-made production, as seen here in this image from a photo shoot on Denimfuture of Filson products.

Morgan said that Filson’s failed 2005 “Lodge” line suffered from quality problems but that its focus on moving cheaper products on a faster, seasonal turnaround basis ultimately failed to attract their stalwart base of retailers and consumers in the “hook and bullet” market (folks who shoot and catch fish– but not the same folks who upgrade their Chinese-made coat every season at Cabela’s). Similarly, Allen Edmonds in the Brentwood era began manufacturing the likes of MLB-themed boat shoes in the Dominican Republic, but still makes most of its $375 cap toes, etc. in its Port Washington factory. It is unclear why Brentwood divested of Filson, which, Morgan said, had recovered under its next CEO in 2006, Bill Kulczyki, formerly of Patagonia, other than perhaps it was time to move onto the Next Big Thing as private equity purveyors of LBO’s are wont to do, and since then Filson has been growing steadily and continues to manufacture many products domestically. You can buy Filson bags next door to Shinola’s flagship store at Willy‘s, and no, they’re not cheap, either. (Peruse them while you buy a $10 bottle of juice, because that’ll save Detroit.)

Beyond Moy’s critiques, the conception of the Shinola brand itself kind of sounds like a load of hooey, right? Shinola? As in, “you don’t know sh*t from [x]?” Well, apparently. Reportedly, Kartsotis decided to locate a brand in Detroit because it was just that attractive to consumers, and the  very name came from the eponymous saying, supposedly from a meeting discussing that market research indicating that consumers were interested in buying a Detroit-made product that was branded as such. It’s a pretty simple twofer– people are attracted to the city’s epic crash, and they’re attracted to domestic manufacturing. We are also generally attracted by well-packaged, sexy advertising, like the now-famous 2011 Super Bowl ad for Chrysler featuring Eminem and shots of Detroit. It’s pretty gross for a company like Levi’s, which makes all but maybe its fanciest jeans in God-knows-where (remember those glory days of the post Cold War global economy in the Marianas Islands, where labor was cheap and the sun was always shining?), to talk about honoring the hard work of a Rust Belt story of epic economic disaster, but advertising doesn’t make the act of domestic production itself disingenuous.

Like most consumer products, Shinolas use a combination of imported and domestic parts. Inability to manufacture at sufficient volume was cited as a reason for using Chinese-made watch cases (though I find it hard to believe that Kartsotis could build a $3 billion company but couldn’t find a manufacturer for a volume of affordable stainless steel watch cases anywhere in the Rust Belt, which still produces most of the nation’s steel), but the straps are domestic leather in an era when Chinese or Indian leather manufacturing is common, and the quartz movement is partly Swiss made and assembled in Midtown Detroit.

A snapshot of some of Shinola's 41mm models at their flagship Midtown store, ranging from $550 to $1000.

A snapshot of some of Shinola’s 41mm models at their flagship Midtown store, ranging from $550 to $1000.

Lest we forget that there are criteria that must be satisfied for a product to even be considered “Made in USA,” it’s significant to consider not only the value of creating employment in the skilled arts and crafts of watchmaking but also in the business model itself as far as growing that employment base. The Economist also pointed out that Swiss watches are usually sold at a ten-fold markup compared to Shinola’s four-fold markup– This means that a Shinola watch would start at about $150-250 in production costs per unit, but would sell, in Rolex terms, for $1500-2500. (Rolex, one of the most recognizable watch brands in the world, sells watches for well over that range– in simple economic terms, it seems to make sense that Shinola would want to undercut their prices, especially if they can undercut their huge markup.)

On the company’s growth, 29 positions were open as of my writing this, and those included 13 positions in Detroit, including positions for actual manufacturing. Can anyone point me to other companies that actually hire manufacturing positions in the same place they hire IT positions and business analysts? There are very few, and what’s more, those actual companies that we view as White Knights (e.g., a friend of mine once said that she’d move to Detroit if Google opened up a big office there) don’t manufacture anything in this country. Apple, the hero of young, white liberals, for example, trumped its domestic manufacturing of one boutique product that no one can afford anyone. In other words, you can’t apply to a job in an Apple factory to make iPhones.

Edwards Brothers Malloy, which manufactures journals for Shinola in nearby Ann Arbor. (From Shinola.)

Economic Reality vs. Marketing Hype

For all its faults, Shinola has completely debased what I’ve long characterized as the idiotic myth that it’s unaffordable to manufacture products in the United States. So, yes, it’s good that things are being made and those things are creating jobs. But Shinola, too, plays directly into the culture of hipster incursion. In amortized terms over the life of an expenditure, I can afford a $700 wristwatch (say, 3 cents a day for the rest of my life) more readily than I can afford a $10 bottle of juice, or a $4 cup of Los Idolos (Sugar Cane Process) pourover coffee served to me while I shop for my $700 watch. Let’s go back to the amortized cost bit– if coffee will cost you a minimum of $1.50 per day, then you reach wristwatch break-even after buying that coffee for a year and a half, or, roughly the same in savings between a normal cup of coffee and a cup of “pourover single origin fair trade small batch hand-roasted by a white guy with a beard who has at least a bachelor’s degree from EMU-or-better.” In other words, there is short-term, disposable consumption and then there is consumption as long-term investment (sure, plus a bit of fashion). The notorious Detroit-bred White Entrepreneurial Guy meme captures the former perfectly: the hipster urban revolution’s drive to consume, consume, consume in the process of populating, repopulating, densifying the fallen city.

Stepping outside the Bedrock or Brentwood brands, think about brands like Bed-Stü, which makes ugly, expensive boots based on a sort of pseudo-Steampunk distressed aesthetic and is insultingly named (with a puzzlingly placed umlaut, to boot) after a formerly majority working class black neighborhood that is, like everywhere else in New York, now being colonized by the young white elite. (Bed Stu advertises “handcrafted” shoes, as though an alternative might be manufactured in a vacuum by robots. Almost all clothing is handmade.) Or Herschel, which contracts Chinese factories to make bags that hipsters are sure to enjoy for years. For all of these brands, there are also plenty of brands that do manufacture domestically and still maintain that gritty urban aesthetic in their marketing– Chrome Bags, for example- Timbuk2’s largest single revenue source still comes from its made-in-San Francisco custom bags but most if not all of its non-custom products are imported. Are those guys liars and punks, too? Where is the balance?

As Jon Caramanica posits in his brutal critique on the “Next Branding of Detroit” (I’m not quite clear what the first one was, other than perhaps “a city with a monolithic industrial base where many people are gainfully employed”):

“Buying something made in Detroit, in this calculus, is not much different than buying a fair trade Andean sweater. You’re buying a small piece of the revival of a great American manufacturing city gone to seed. Or at least, you’re buying into the liberal idea of what supporting a distressed economy means.”

It’s true– it is a pretty happy-go-lucky-liberal idea, after all. But for all of Caramanica’s snark, never mind the fact that he himself is probably paying more rent in Brooklyn every month than the price of a Bixby bicycle, the company is a smash hit with a target of several hundred thousand watches produced per year by 2015 . If Detroit itself nets even 10% of that revenue, that’d be about a six figure sum reinvested into the city every single day. No, it’s not a home-grown enterprise, and yes, I think it is a load of crap to pay thousands of dollars for a bicycle that isn’t made out of, say, moon-fiber.

But is the idea of “Detroit as a watchmaking center” laughable because its watchmakers (plural– there is another!) came out of a private equity firm rather than having grown out of a small cottage by a bubbling brook? What about a company that makes some of its watches in Pittsburgh as well as a $2,450 model made in Nepal, whose advertisement claims that it’s appropriate for them to making watches in the Himalayas, since, after all, time is sort of standing still there (I didn’t make that last bit up). Or, what about a company that does no advertising whatsoever but sells volume foreign-made-domestically-assembled-by-union-labor watches? The reality is that only one of these companies has a strong marketing presence, and it is the one that is taking the market by storm. [Neither Hampden nor Detroit Watch Company responded to requests for comment.]

The Elusive Balance Between Cultural Piracy and Economic Growth

Critics make some good points. Caramanica’s snide dismissal of Shinola seems to come more from New York’s coastal chauvinism and denigration of all things not-New-York than it does from a real critique of the product itself; Gould, meanwhile, concludes by saying that “[t]here is no debating that in the Shinola fairytale, they are the heroes. And Detroit does not want to be saved.” It doesn’t?

If “saved” means “brought a bit farther from its current state of economic and municipal catastrophe,” then I think that Detroit wants to be saved. But it doesn’t want to be patronized. There’s a big difference– the former involves a bailout by means of a creative and diverse base of investments, experiments, influx of new residents, and renovation of infrastructure and architecture. The latter involves cultural piracy. Detroit is in many ways the ultimate experiment. How do we solve the issue of such a large municipal bankruptcy? Such a gross scale of disinvestment and unemployment and poverty? How can we discuss gentrification as expropriation in a city where most of the housing stock remains quite affordable even after new development or investment occurs? Nancy Derringer’s article points out the problematic nature of the “7.2” issue– TLDR: “We can exist inside this 7.2 square mile safe haven of consumption and new investment, but forget the rest of y’all, maybe.” Indeed, many projects go beyond marketing experiments and Shinola pales in comparison to some of them.

Native Detroiter or not, I’m ticked off by that. I was dismayed when I visited Detroit and found that the craft cocktail bars are just as exorbitant as they are in Chicago, indicating that yes, this is a destination for the handful of y’all with hefty salaries. My thought process went from, “Well, maybe they’re just Brooklynites selling to other major-metropolitan-transplants,” to “Well, if this starts a conversation about better, cheaper establishments, I’m all for this rather than the space being abandoned instead.” Cautious optimism, but that won’t stop me from snarky commentary questioning the real necessity of a $12 cocktail. David Wondrich offers an interesting take on gentrification of a city through its drinking culture.

When I mentioned the idea of marketing, Will Morgan saw it as disingenuous to try and ride the coattails of a well-established brand, for example the rugged likes of Filson or Eddie Bauer, to establish a diversified, mass consumer product with a big market share. He told me a story about buying a pair of thermal wool long underwear from REI that, he said, were liberally branded with information and flags about their Scandinavian manufacturer, only to find later that the darn things were made in China. Does this not seem a far worse sin than any committed by Kartsotis’ Detroit experiment?

“Maybe it’d be a little bit more honest if Chinese manufacturers pushed a ‘Made In China’ brand instead?” he suggested wryly. With little Communist flags? I mean, surely that’d be better than the likes of Skagen Denmark pushing its Scandinavian heritage when all of its products are– and have always been- made in China. Will also noted that some success stories were born from American-made, either through acquisition or growth, and became something completely different– Eddie Bauer, for example, which was founded in 1920 and originally manufactured quality jackets, branding itself based on its signature logo, which it put on US army jackets, but whose brand can be found on a variety of all-imported products at pretty much any mall in America and really took a huge hit in getting there. On the other hand, that growth happened years and years ago, then it’s significant if big private equity money (the great bellwethers of everything terrible and grand about capitalism) is suddenly interested in “American-made” in 2005, whereas ten years prior the focus was all on outsourcing. Just a guess that this is because domestic manufacturing has value and even the orthodox powers that control the lofty private equity capital markets have wised up.

At the risk of sounding like I’m reducing this argument to “any new investment is good investment,” I think that it’s important to understand any company as one of so many cogs in the giant wristwatch of metropolitan economy rather than as emblematic of the coming tsunami of cultural problems and expropriation. Detroit will never be Brooklyn (thank God), and I can only hope that its path toward economic stability can learn from Brooklyn’s disasters. Ryan Harte concludes his article on the Brooklynization of Detroit (Brooklyn, an apt metonym for the Great Force of Gentrification) by saying that indeed, no one costly, panacean project or policy will “save” the city, but rather, that support is needed for many varieties of experiments whose successes can be underwritten and repeated, namely through a democratic process.

There was no democratic community process governing Shinola’s over-the-top marketing campaign that advertised that you, too, can be young, white, and conspicuously consume in the Motor City. But Hart might agree with Shinola’s characterization of Detroit as a nice city of nice people, with the added commentary (emphasis added): “Detroit does not need to be business friendly, manufacturing friendly, or convention event friendly. Detroit needs to be people friendly. And we are. Meet us and you will see the people here are full of pride and loyalty to their communities…” That is something I can get down with.

Sustainable Summer in the City

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Ziggurats of Modernity (photo by author)

 

This week I’m attending the 2014 Summer Institute on Sustainability and Energy, an annual, two-week intensive seminar on sustainability hosted at the University of Illinois at Chicago. The program’s packed schedule includes trips to Argonne National Lab, with whom we will be working on our final projects, and to O’Hare Airport to check out the moves they are making in the directions of sustainability.

A cursory survey of the group suggests that the mean age is probably in the mid twenties, with just under half of the students presently involved in their undergraduate studies, probably about the same proportion in graduate studies whether a Ph.D. or a master’s program, and the balance (myself included) involved in some sort of full-time professional work.

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Pictured above is a sketch from a group project that required us to figure out what to do with a remediated former electrical substation in the middle of the University of Illinois at Chicago’s campus focusing on sustainability education and brownfield redevelopment. Our team, including myself (LEED GA, real estate finance, energy efficiency), Junjun (China, urban planning policy), Christine (K12 teacher), and Jason (LEED AP, interior design), and proposed building two connected structures that would serve as flexible event space and classroom space (indoor and outdoor), one structure being an “optimal” structure with high-performance, automated, and active technical systems, and the other being an “affordable” structure with more natural building materials and more passive characteristics. The exterior included plans for native tallgrass landscaping, test agricultural plots, and PaveGen, experimental kinetic energy capture technology (a lofty addition– “the donor steps,” as we called them, whose funding would help build the roughly $650,000 structure and landscaping). 2nd place out of 11, but we’ll do better for our final project!

Our final project assignments are broken down into four separate categories, each of which will involve eleven final project presentations. From the summaries:

1. Urban innovation (my group– perfect!): “Urban areas are undoubtedly fertile ground for innovative ideas and collaborative efforts. Universities, government entities, national laboratories, and businesses all exist in the same setting. How do we make the most out of this situation? How can we better collaborate to advance science, policy, and business initiatives in the energy sector?”

2. Duck Hunting: Addressing the macro-level grid impacts of high solar [photovoltaic] penetration: This is certainly the most engineering-heavy proposal and probably the most technically challenging, addressing the so-called “Duck Chart,” a graph of predicted daily electrical usage shaped somewhat like the eponymous bird that illustrates the need for major grid improvements. A society reliant on photovoltaic (PV) energy production is intrinsically more resilient, but a grid is not on its own– specifically, the chart indicates the fact that changes are going to have to be made to ensure that generation can adequately respond to the quite literal “night-and-day” effects of solar energy production on a daily basis.

Here’s how it works: Rates of electrical generation are mostly regulated by complex software and computerized controllers. When the sun rises, photovoltaic production spikes dramatically and suddenly, meaning that producers of non-photovoltaic electricity have to cut off their supply (the grid can hold a finite amount of electricity and you can’t just keep producing electricity at a steady rate because wires don’t hold extra electricity). When the sun sets, generation plummets, and non-PV plants have to quickly ramp up generation. This is problematic when you’re comparing thousands of arrays, each with perhaps a few dozen kilowatts of generation, whose users immediately need light after the sun sets– and when those kilowatts are contrasted with multiple-megawatt coal, nuclear, and natural gas plants. From the SISE document:

“According to their analysis, high penetrations of renewable energy, as a result of state goals (including a 33% renewable energy mandate by 2020), are leading to critical challenges to the integrity of the electric grid. These challenges include: short, steep ramps – when the ISO must bring on or shut down generation resources to meet an increasing or decreasing electricity demand quickly, over a short period of time; over- generation risk – when more electricity is supplied than is needed to satisfy real-time electricity requirements; and decreased frequency response – when less resources are operating and available to automatically adjust electricity production to maintain grid reliability.”

Source: CalISO via the Institute for Local Self-Reliance.

3. Revitalize the Fisk Generating Station: “Create a business model to repurpose the Fisk Generating Station that can be used as a model for other coal powered plants closing throughout the country [… identifying] planning issues under future scenarios to develop a strategy that effectively reuses the site and will benefit those who live in the surrounding community [… and considering] the social impacts the plant has had on the Pilsen neighborhood and how the site can benefit the local community.”

4. Innovate Chicago Corridors Using Sustainable Street Principles: Creating public policy and accompanying deployment strategy to create complete streets with adequate pedestrian accessibility, stormwater mitigation strategies, expanded and improved transit options.

Stay tuned as we develop our final projects, and follow the Institute on Twitter. Check it out on Twitter with at #sise2014 or @SISEatUIC or @handbuiltcity.

Past, Present, and Promise in the Prototypical Failed Steel Town

http://pghbridges.com/mckeesport/0595-4467/mckeesport1900platidx.jpg

A confluence involving a steel town and the Monongahela River– I’m sensing a trend here. (Thanks to Bruce Cridlebaugh.)

On Monday I had the privilege to explore McKeesport, a city twenty minutes south of Pittsburgh in my home state of Pennsylvania. The city had popped up on my radar last year because of the renovation of a historic YMCA building as a Passive House by Pittsburgh-based Thoughtful Balance. The building was renovated as transitional housing (“McKeesport Downtown Housing”) and its PHIUS+ certification qualification boasts quite respectable numbers– check it out, if you’re into that.

In this case, I was not only sightseeing but also visiting Alan Diede and Maryann Huk, a dynamic duo of civic and historic preservation activists and the moving force behind the McKeesport Preservation Society. Diede and Huk gave me the grand tour of the city, whose historic and industrial architecture is situated at the confluence of the Monongahela and the Youghiogheny Rivers (the “Mon” and the “Yok,” as they are colloquially known, and I had to remember to keep my vowels closer to Mawn than Mahn).

Founded in 1842 in the then sleepy backwaters of Pennsylvania (not terribly long after we had stopped calling Ohio the ‘Northwest Territory‘), the city became famous for its National Tube Works, founded in 1872 by the Flagler Brothers of Boston (no apparent relation to industrialist Henry Flagler of Standard Oil and Miami, Florida fame), who operated a factory in South Boston before relocating to McKeesport, buying an existing factory, and building the Works as we have come to know it.

US STEEL’S OTHER CHILD LEFT BEHIND

I’ll avoid rehashing the played out narrative of the boomtown-gone-bust, but I’ve referred a couple of times to McKeesport as the Gary of the Alleghenies, a dubious accolade, perhaps, but an apt descriptor when considering that both are 1) steel towns 2) in the metropolitan footprint of a major city but not within that city’s municipal boundaries, and towns that 3) lost a substantial percentage of their manufacturing base and therefore population base through 4) the same monolithic employer. McKeesport’s peak population of 55,355 came, somewhat unusually in US urban history, in 1940, before hitting its current and potentially continually descending low of 19,686 (64% loss, about a 14% averaged decennial loss), while Gary’s peak of 178,320 came, more typically of an American city, in 1960, versus its present-day, steadily-sliding number of 78,450 (56% loss, or a nearly identical decennial loss average, though over a twenty-year shorter time span).

Map of McKeesport with the riverfront Tube Works site highlighted.

1955 tourism map of McKeesport with the riverfront Tube Works site highlighted.

A 1955 town map listed 12 industries including nine other than the US Steel facilities, and four of these were expressly situated in the metal fabrication sector. Before the current era of cheap and easy transportation, heavy industry (really quite heavy) often spurred the growth of an industrial cluster in its vicinity. Back in the days before industry was something that was relegated to robots in corrugated steel warehouses in suburban industry parks, a mill was more than a simple facility for production that  could be moved as soon as the next town over ponied up some TIF dollars— it was an institution. A Mill, writ-large, couldn’t easily be moved, couldn’t inexpensively be started up or shut down (for example, with blast furnaces that had to be run continuously), so it was a safe bet to count on that source of production. National Tube employed at its peak more than 10,000 workers, about a third of the peak employment of US Steel’s Gary Works– but still massive, and about three times larger than the workforce of Braddock’s Edgar Thomson Mill, which still operates today at about 25% the size of its peak workforce.

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Quality control inspectors at National Tube, 1944. (uncredited, Library of Congress photo)

How did that work out?

Well– not so well, as it turns out. National Tube Works, originally independent and acquired by US Steel in 1901, closed in 1984, by which time the city had already lost a substantial amount of population. US Steel decided to reopen the plant in 2011 amid the Marcellus Shale frenzy, which has brought industrial demand, jobs, and major questions about water quality to the Keystone State– but just kidding (closed again in 2014, blaming, again, cheap imports from Korea and China).

Warehouse on the old Tube Works site.

Warehouse on the old Tube Works site.

Before visiting, I had imagined McKeesport as an Allegheny analogue to Gary, whose downtown is a crumbling remnant of its former greatness. To compare them purely in terms of their urban forms in addition to the ways I’ve already mentioned, In Gary, the major north-south artery of Broadway, which runs from US Steel’s Gary Works the whole way to suburban Merrillville and southward, is largely abandoned, and many of the buildings are in severe disrepair. Gary has offered some success stories, but attracting interest in even nearly free real estate has been difficult– McKeesport has some of the same challenges.

Both cities have great waterfronts, though– namely waterfronts that have been cleaned up since their old steel days and are ready for development. McKeesport even has a marina (Gary is working on it). Local development corporation RIDC offers much of the former mill site for industrial, commercial, or mixed-use development at affordable prices, and a number of the original buildings have been restored while the rest of the site has been cleared.

INDUSTRIAL CLUSTERS AND THE CULTURE OF MAKING STUFF

Some have noted that in spite of the steel industry having taken a major hit, the loss of monolithic producers didn’t actually cause the demise of the Pittsburgh region overall since, in spite of net losses of jobs, the industrial clusters of producers that were created to supply products to and manufacture products from the steel mills actually ended up forming a diversified industrial sector able to compete in complex regional and global supply chains. In other words, the diversified steel production and associated manufacturing industries remain productive, even if their job numbers, especially from the monolithic Mills, are but a shadow of their former greatness.

Detroit demonstrates this cluster phenomenon through the rise and fall of the automobile industry and creative attempts to revitalize the city through smaller scale manufacturing operations capitalizing on the city’s wealth of skilled manufacturing workers– indeed, this is partly based on branding (Detroit, the manufacturing giant) as well as actual technical skill sets (workers who know how to build stuff). Will we start seeing made-in-McKeesport wristwatches or outrageously expensive designer jeans as we see in Detroit? Probably not today or tomorrow, but we do have to think about the latent economic advantages in places like this, where a legacy of industry is as important as the underlying assets of the market– affordable prices, intact architecture, location in proximity to a major urban center, and existing infrastructure.

TOWARD A NEW CITY THROUGH ITS HISTORIC BUILT ENVIRONMENT

The primary reason for my visit was not to research the decline of USX, but rather to check out one specific facet of this core of intact architecture. The Benno Janssen-designed 1925 Penn-McKee Hotel is one of the more iconic abandoned buildings in McKeesport’s downtown, but it would be an unconscionable understatement to say that it is among but a few. Occupying the better part of a city block with a foot print of nearly 17,000 square feet, the steel and concrete structure offers four floors and a basement for a total usable square footage of about 70,000 square feet.

The major incident that really bolsters the Penn-McKee’s overt historical significance is a 1947 debate hosted there between then-freshmen Congressmen and later-presidents, Congressmen John F. Kennedy and Richard M. Nixon. The debate occurred shortly after the passing of the Taft-Hartley Act, an act that, if not the sole or most direct contributor to the demise of American labor, certainly raised the arm holding the hammer to drive nails into the coffin of the labor movement in the decades to come. Proponents, remembering the Great Strike of 1919 (which hit the entire Pittsburgh metropolitan area pretty hard), fed up with the postwar labor strikes 1945-46 and increasingly wary of the possibility of radicals coöpting union power to incite strikes and subvert the pillars of the Great American Democracy, passed the Act to keep a closer eye on labor.

Kennedy and Nixon didn’t agree on this matter. There aren’t any great records of the debate itself, which included a number of local dignitaries from both sides of the debate. The event was trumpeted as a showcase by the city– whose power elite included major players in both labor and industry- of its significance on the regional and national stage of industry. It weren’t called Tube City USA for nothing.

Sanborn maps– when typefaces and steel production were grand business.

Using the historic hotel as a centerpiece for broader revitalization efforts would require a substantial intervention, [November update:] as we pieced together in a meeting with a pro, probably something to the tune of a couple million dollars in tax credits plus the same amount in a public loan guarantee or very low interest financing. The property is in severe disrepair, having suffered smoke damage from the Great Fire of ’76, which also wrecked a lot of the downtown, and a fire in 1997. Fortunately for the future of the structure (but unfortunately for proponents of its demolition), its rock solid concrete-and-steel construction means it isn’t going anywhere fast. Indeed, many of the rooms on the third and fourth floors are still intact with original furniture– metal furniture by the Simmons Company, famous for its mattresses, since the builders wanted to make the structure exceptionally fireproof by avoiding the use of wooden furniture. Excellent link to some refurbished versions here.

simmonsWith negative stigma hanging over the town like an air inversion, even the distant future potential market value of the building is considered by the average banker or investor to be less than the liability of owning it (it is assessed at $30,000). Mayor Mike Cherepko was reached for comment saying that he’s interested in figuring out a way to renovate the hotel but cited as a difficulty in the redevelopment the scarcity of public funds and what he believes is the extraordinary unlikeliness of private capital to mobilize for such a grand project.

The preservation of buildings like the Penn-McKee is critical to the future of the distressed city, and an effort toward revitalizing it in a manner congruous with a broader idea of sustainable community development will necessitate a community equity model like what we can potentially achieve through Fundrise (once we get past the idea that Regulation A offerings have to necessarily cost $50,000 to file).

National Tube’s founder John Flagler nailed it at a reception held to honor him in McKeesport in 1909:

“The growth of cities and the growth of capital are signals of opportunity to every wage earner. As the population and capital grow, the workmen can seize advantage. Much of the prosperity of our people is due not to the day’s work, or the year’s salary, but to the investment in a house and lot, in a farm, or in a few shares in a business enterprise, which with the growth of the country have all increased in value and have converted thousands of workingmen, in spite of themselves, into capitalists.”

Whether or not this rosy image of capitalism might have panned out for every worker is, of course, dubious. It certainly didn’t pan out for the city over the long term, but that’s not Flagler’s fault, it’s the corporate responsibility of US Steel for screwing up the game as well as a whole broken system of equity and ownership– a system that needs to be fixed. But what better way to realize Flagler’s mantra here than to rebuild the city with a better vision for what equity can be and what it can do for the city?

Huk and Diede drive me by a pile of rubble downtown and mention that it was, just a few weeks ago, a Richardsonian mansion. With sky-high labor costs, tight credit, and the need for a hustle to get past that first step, the mission of preservation as a tool for revitalization is all the more important– but also all the more difficult- in cities like McKeesport that lack the economic momentum to begin with. Beyond decrying the sins of demolition, it is important to figure out better ways to advocate for it, and better ways to capitalize on a city’s history in thinking about redevelopment efforts rather than just chasing after the “next big thing.” The facility at Carrie Furnace just up the river toward Pittsburgh, for example, is still standing– and offers tours.

I ask what the reason was for the demolition of the home, which must have cost a pretty penny. (The Penn McKee Hotel’s demolition is budgeted well into the six figure range.)

“More boat parking?” Diede speculated.

It’s not just on an individual project basis but on a philosophical one as far as how we think about progress. And we’ve got a ways to go.

Upcoming Webinar on Crowd Finance

Partner Nat Zorach will be presenting a webinar with Housing Action Illinois on June 5th at 10:00 CT on the use of crowdfunding as a community development tool. Exploring the historical origins of crowdfunding and a few different models, most notably the unique Fundrise platform on which The Handbuilt City currently maintains a substantial and growing network, Zorach will go through several individual case studies as well as scenarios in which the funding model could be successfully deployed.

Zorach connected with Housing Action’s Nate Hutcheson and David Young during the polar vortex winter of early 2014 after presenting on Fundrise at Open Gov Civic Hack Night, a weekly Tuesday-night plenary of tech-savvy, civic-minded Chicagoans at 1871 in the Merchandise Mart.

Handbuilt’s team is meanwhile working on putting together a private placement memorandum as the major step forward in developing an investment offering on Fundrise, and we hope to finish this up in July to begin the process of raising money for affordable housing development in Gary.

Register for the webinar here. We’ll see you there!