Conversations with Advocates of Fair Growth
Overview | Conversations with Advocates of Fair Growth | Living on the Fenceline
Stephen A. Perkins
Stephen A. Perkins is the senior vice president of the Center for Neighborhood Technology in Chicago.
Interview
Steve Lerner (SDL): Is the smart growth movement beginning to take equity issues into account?
Stephen A. Perkins (SAP): Seaside [the affluent New Urbanist community] should not be the totality of smart growth.
SDL: Do you see a gathering movement to de-concentrate poverty through a regional approach. The Center for Neighborhood Technology (CNT) has worked on the reverse commute, the Location Efficient Mortgage (LEM), and on retrofitting small apartment building so they are more energy efficient. I'm interested in what I call the "fair growth" issues such as "just transportation", affordable housing, and exclusionary zoning. Do you see a gathering movement around these issues?
SAP: Everything we do is in the rubric of what you are talking about because equitable smart growth has to deal with existing communities across the board. If you are trying to restrain sprawl and you don't have the capacity to put an iron wall around the city and there are no natural boundaries -- the corn fields just go on forever -- you must do whatever you can to make transparent the marginal cost of growth on the edge [of the city]. We need strong financial incentives and regulatory measure [to direct growth back into the city.] We don't see too much of that happening now. The main thing is to use a variety of strategies to promote reinvestment in existing communities - both the city and the inner-ring suburbs, the older suburbs.
In our prospectus we say that we work in three ways. We do public policy research advocacy, coalition building, we invent economic tools and mechanisms that promote smart growth and we do mapping and data gathering that make information available to citizens that empowers them. These [fair growth] issues are all related to the strategy.
On the public policy front, we continue to anchor the largest regional coalition on transportation and land use called has been developing a powerful regional consensus for solutions to transportation, environmental, and economic problems that have traditionally plagues inner city communities and have spread to inner ring suburbs and older satellite cities. The Commission's citizen transportation plan, which has been endorsed by 141 organizations and municipalities, formulates a vision for the six county metropolitan region. It is socially, environmental, economically responsible. The plan has provided the foundation for the negotiations with the Chicago Area Transportation Study (CATS) about the priorities of the 2020 regional transportation plan; and for negotiations with CATS about its undemocratic structure; and for a grassroots mobilization strategy for legislative changes to attain the recommendations of the plan.
This coalition includes 141 organizational members from across the region. It is now organized with several county caucuses. At the beginning it developed the Citizen Transportation Plan, which was our mega strategy about where public dollars should go for infrastructure. We developed it in partnership with seven other organizations representing seniors, the disabled, and community development groups. That became the beginning of a broad citizen mobilization. At the beginning it was mostly inside the city of Chicago but it launched a long term inside/ outside strategy.
We have the unenviable situation of having two planning agencies here: the Land Use Planning Agency, which has good governance and no resources and no [enforcement] teeth; and a transportation planning agency, which is a department of state government and doesn't even have any local governance. It is mostly [comprised of] civil engineers. It is called the Chicago Area Transportation Study (CATS). They feel they don't need any citizen participation because they already know the answers.
Jacky Grimshaw [of CNT] has provided remarkable leadership on this. On the outside we have reported them to the feds and we have gotten them sited for environmental justice violations. We are trying to build a coalition to abolish them and create in their stead an integrated land use transportation agency that is accountable to the people in the region. So we are on the outside pushing. At the same time we stay on as official members of committees and they have to be nice to us. And Jacky never personalizes this so she has good relations with these people while she is trying to abolish their jobs. Among themselves they may hate her but they are always extremely cordial so she chairs one of the major committee on citizen participation. And they have come a long way.
We are now in the second round and are doing the citizen transportation plan #2. And Jan Metzger is leading this effort. She is director of this coalition with Jacky. This time they are doing it on a geographic basis so they have divided the region in 11 sub-areas. We are convening a session with 30-60 folks in each of these sub-areas. We are going through some process games, we have hired some outside facilitators, and developed some games so that people can understand what some of the transportation investment options are, to clarify what the range of options are, to begin to frame what the transportation and land use vision is for their sub-area. Then we come back with a document that they critique. So they have a plan. This strategy has a number of intentions: It educates people on the ABCs of capital investments to create their own regional vision to prepare them to participate in the official planning processes of both these two agencies are heading into now.
The first of these sessions happened. They will go on for the next 18 months and then we will publish another Citizen Transportation Plan that is totally independent. This is our way of saying: this is the plan we want and a thousand people have participated in it. So when they get to what Cook County wants they are willing to speak for themselves. It is a very ambitious organizing effort.
SDL: Who are the facilitators and why did you feel you needed them?
SAP: They are from Millennium Consulting in Chicago and run the sessions. We worked out a format with them. We've developed some of the tools but we did not want to run the sessions. We wanted someone who was neutral and committed to the process. It also frees our [CNT] people to be more active than they would be if they were leading the sessions. We still are responsible for the right products. But this allows us to be more transparent in our own ideas instead of trying to hide them. We do have a point of view and this allows our folks to share it. And people either like it or they don't but we are there, not running, and not guiding it.
SDL: How do you chose who is invited to this?
SAP: We look for people who have shown an interest in any of a range of issues from bicyclists to livable communities people, economic development folks, senior citizen groups, and cultural preservationists. These are activists. This is not purporting to be an objective group of people with a cross section of the region because we are taking as a starting point the values and policies of the first transportation plan. We are now refining this.
SDL: So CDCs that are interested in getting a new metro stop or keeping one from being destroyed would be involved.
SAP: The number of CDCs that see the interest between what they do and regional stuff and have the energy to work on it is very small. Mary Nelson is on our board and she is in 14 arenas simultaneously. But there are some CDCs that are beginning to be in it. Mostly it is not CDCs. It is mostly people who have an issue that they care about and they understand that the plan for the region and where federal dollars go in the region is going to affect their issue dramatically whether it is access to public transportation or to be able to walk down the street on sidewalks. It covers a whole range of issues. This is where they can come together with other people to create a common front.
SDL: What is going to happen here?
SAP: People understand that this is a preparation for them to engage with the folks that have the power. These are the decisions that will be made by NIPC (Northeast Illinois Planning Commission) and CATS (Chicago Area Transportation Study.) They want to have input into this process and see the benefit and so far it is going well. The starting point is our plan.
SDL: How was your first plan received?
SAP: Great. We did two versions.
SDL: Was anything implemented?
SAP: Over time a lot of stuff has happened. Jan can give you a better enumeration of this. Before there was no focus on pedestrian or bicycle issues but there now is. There are official bicycle and pedestrian projects that have a reasonable level of allocations attached to them. The issue of citizen participation has been a tremendous victory. There is now citizen participation throughout that agency. Although not on the Board: we still have not solved the governance problem. And they actually come to us to work with them on citizen participation and we bring people to the table. They say: there are no Hispanics involved with us. We go and put together a group of Hispanics and their task is to have meaningful participation. So that is enormous progress.
Beyond those three areas I don't know that we affected much. This agency has not gone through a paradigm shift where they are primarily about compact development around transit nodes and walkable communities in which walking and biking is the primary transportation mode for the region. But we have made reasonable progress.
There is also the Illinois Legislative Smart Growth Commission that we sit on and we try to influence. We worked on the connectivity between the three transit operating systems. The regional transportation authority, the umbrella financing authority for the region, promised that there would be a unified fare structure over 30 years. They then got a resolution and appropriation through the legislature a year ago for $400,000 to address this question. There is a clear need for the community to get out into the suburbs for jobs.
SDL: In Atlanta affluent suburbs opt out of the city transportation system.
SAP: Yes, in Atlanta Marta comes up the [suburban] border and stops.
SDL: Do you face that kind of thing here?
SAP: Not really. The Chicago Transit Authority serves 35 suburbs. Then we have METRA which is the commuter rail system, which is where we did the reverse commute. They are in a massive growth mode going way out with very few riders. They are growth advocates on the fringe. Then you have PACE which is the suburban bus system, which is not very good at connectivity. The systems exist but the CTA line and the Metra line run parallel and riders can't get from one to the other. So if you are a city person and start of with CTA it is hard to get over to the other and that is critical. There should also be some pricing concession if you are going on two of them. That's critical.
SDL: How many local governments are there in the Chicago Metro Region?
SAP: Something like 250..
SDL: Does that make Chicago the poster child for metropolitan fragmentation?
SAP: That's right. We are also the place where specialized units of government were founded so there are 1,200 units of government including forest preserves, sanitary districts, and mosquito abatement districts. We have lots of units of government.
SDL: Myron Orfield suggests that Metro Regional governance is what we need. It would permit the sharing of revenues and burdens in a more equitable and efficient way. What do you think? Does Chicago need an elected metro regional government?
SAP: When you look at the Citizen Transportation Plan you will see that tax base sharing is one of five recommendations. So we are for it. Let me contrast two communities, the South Shore Community, on the south shore lake front, where I live, and where I am still a community leader; and Evanston, where I moved. They are both 70 blocks from the downtown Loop. They are both on the Lake Front, they are both old communities, and they have the same population basically, 70,000 to 80,000. But South Shore is represented politically by parts of three aldermen. It has no government offices inside it. It has no indigenous capacity to solve any problem except for police and fire forces. In Evanston you have sub-manager, an old administration, one alder person per 5,000 voters (while we have one for 50 down here), and the capacity to solve problems. This is a material question for me when you look at Regional government. In Evanston I can solve a lot of my problems locally and I am well protected. I may not like all the decisions but I can go knock on the door an get in and I am only one of five instead of 1,000 knocking. A regional government is maybe a plausible solution to some of my problems because I am aware that the urban fringe growth is hurting me and drawing resources away. But in practice it is more problematic because the most meaningful things are already very far away and hard to get to. My capacity to influence what the mayor does is really zero. The current mayor has a closer control of the city than his father ever dreamed of. And basically if you are not on his side you don't get anything. And if you do you get it at his behest. It is not an attitude of community-based problem solving. And community-based organizations are a very pale institutional answer. So don't try to sell that to me on another layer of government.. I'm already controlled by people pretty far away who seem impossible to affect. I think [metro-regional governance] is a non-starter for anybody who is in the city. I have never heard anybody who wants it. So you have to look for other strategies to solve the same problem.
Orfield's maps are great. We have five of our fifty staff people working on maps. So we agree that maps are extremely valuable. And it is obviously true that there are a set of losers in the region and a set of winners. But Myron [Orfield's] strategy of pulling together 60 percent of the losers and having them take control flies in the face of the fact that the decisions are made in the state legislature. So you can have 60% of the metro mayors come together and they then have to deal with a state legislature that is Republican. The state senate [in Illinois] is Republican.
SDL: But if the metro-regional representatives were elected the dynamic would be different, wouldn't it?
SAP: But how do you get there? You have to get there through the state legislature. And nobody has ever indicated any strategy for getting [this] through that legislature. The Democrats have a majority in the House and they might or might not support it. But the leadership in the senate is Neanderthal. SDL: There are two questions. One, is it politically feasible; and two, is it what we should be doing?
SAP: I think the answer is no on both counts.
SDL: Some are saying that the metro regional area is where the economic competition is going on.
SAP: They are. This goes back to 1997 when Scott [Bernstein, director of CNT] was on the President's Council for Sustainable Development. He headed up a committee on regional and metropolitan and rural innovation. We got some money together and organized 12 regional conversations on the metropolitan initiative. We were in Chicago, Denver, the Bay Area, NY, Atlanta etc. We posed three questions: what is the state of metropolitan cooperation; how could it be better; what roll could the federal government play to support it? We ended up with the Partnership on Regional Livability which Ford has funded.
At the core of this is the idea that what are needed at the regional level are strategies, not institutions with broad participation and support: civic, community, government, and businesses that can actually solve some problems and can do so in a way that most people agree with. Then, once that strategy has been put in place, we could go to the government and ask them to participate. So when the Clinton Administration was around we basically went into a reverse Request for Proposal process. We go to the feds and say: let's see how you can add value...not money, although we do want money. We developed five memorandums of understanding with the federal government where the lead agency would coordinate the 2 or 20 agencies [involved in the issue] to make this strategy work.
In Chicago we focused on what we call "Clean Air Counts" and it is a regional clean air strategy that has five sub campaigns aimed at residences, businesses, and government. This was funded with support from the McArthur Foundation. The MOU with EPA asked that their contribution be to have their economists monetizing and verifying the pollution changes so we could determine what pollution reductions are happening and what it is worth on a regional basis.
In Atlanta there are two projects. One is the Chattahoochee Riverway project to recapture the Chattahoochee River and to put a 500 foot buffer all the way along the river. There is very broad support. It became a Partnership for Regional Livability (PRL) project because this was a way to bring in the federal government and integrate all the government actors who were many. It moved from being a greenway project to being a watershed project where the federal government played a major role in measuring and validating the watershed implications of this strategy, opening up funding and regulatory levers that are not otherwise available as a greenway project. The second one is being done with the Atlanta Regional Council, the regional planning agency along with Hattie Dorsey's operation, the Atlanta Neighborhood Development Corporation. They have this livable communities initiative that is putting planning grants out to communities all around the region to develop visions and plans of integrated urban affordable housing around transit centers. And PRL is trying to figure out how you finance mixed use, mixed class, mixed race housing in these centers.
In the Bay Area there are two projects. This is the best project of all is the Community Capital Investment Initiative (CCII). This scheme is intended to increase capital. It comes out of the Bay Area Sustainability Alliance. They have this complex structure that includes a business council, a government council, and a community council and these formal negotiations. Despite the cumbersome nature it actually works. This initiative was intended to generate the equity capital to redevelop the 46 poorest communities in the Bay Area. And they have several funds. This is primarily private money. One is the smart growth fund; one is the community development equity fund and they raised $150 million. Do you know James Nessen (?) an activist in Oakland and a vice president of a socially responsible investment funds. He has been the point person along with Andrew Michael on putting this family of funds together. They now have major participation from the state of California so they are aiming at putting up a $250 million equity fund. They are getting it from banks, corporations, and from foundations. The Community Council, which is part of this, now headed up by James Hurd and Angela Blackwell, has gotten some money from Hewlett Packard Foundation to build the capacity of community groups to be part of it. Part of the specs is that there is always a community presence. They are looking to fund keystone developments, large, significant scale projects that one way or another have an equity component, a social equity component, and where there is either a community partner in the deal or where there is a community partner that is very closely involved. So it is the biggest capital thing I have ever heard of. And this is equity money so it will leverage some billions of dollars of investment. They are in the business of not only raising capital but also figuring out how to improve the capacity of community to partner.
SDL: So the community people will have some input into what the development will look like.
SAP: And they may be in the deal. One of the missing characteristics is you have these different funds that have different missions and they also may have different interest rates. So they are trying to show that you can get conventional returns with an equity component. Their analysis is that you are going to be in a small pot of money. But they convinced the Community Council that they had enough leverage and strategies under their belt to maintain the social equity aspect.
Through the PRL what we did was to negotiate HUD to be the lead federal agency. And there is a HUD Community Builder who works full time on it. His task is being the liaison to HUD and the other federal agencies and to help form a similar partnership with the various departments of state governments. The theory is that government is extraordinarily complex and that there has to be some integrative process, so you can have one government partner as opposed to 14 government partners.
The Footprint project, which is an attempt to create a regional smart growth planning process in the Bay area, will use the heavy involvement of federal agencies for mapping and data gathering. In this fashion the project will engage, on a county by county basis, in alternative futures scenario planning process and then integrate these into a Bay Area Wide plan. The lead agency there is the Department of the Interior.
PRL began when some national foundations met at the White House and said we want to work with the feds on metropolitan cooperation. So PRL is really a foundation animal. In each of these communities there is some very strong foundation involvement for money and for convening and for political advice and support.
Denver is the one that hasn't really taken off. It has no foundation support. We took a gamble and the gamble hasn't worked out. They decided to focus on regional workforce questions and look at both the geographic mismatch between low-end workers and regional jobs; and also at the flaws in the training and support system. They had no money so they were forced to look to the federal government for operating support. They went in with an interesting proposal with a lot of support from PRL and they didn't get it so they basically have stalled out. They don't have resources. But the strategy is fascinating that they are working on.
We are now in the process of writing nine monographs on what we have learned in the past two years. These are strategy centered monographs, reflecting this regional strategy that I have described to you. They will be completed over the next few months. The strategies include: clean air, watershed, mixed use housing.
So the thing about that strategy is you actually can do it now. It is a consensus-coalition strategic alignment challenge. I thought it was impossible when this thing started. And the federal government people said: well, we are interested in all those projects where you have the mayor, the governor, the business community, the civic community, and community organizations agree. That is a null set in my experience. But that hasn't proved to be the case. In these cases there is very, very broad consensus. So it proved me wrong. But it is a strategy we can actually pursue now.
The problem with all these procedural things is that you can get the procedure down but you may not get the substance. It is about who controls the institution by the time it gets put in play.
SDL: The Administration has changed since this began. Do you detect a discontinuity in the relationship with HUD and the EPA.
SAP: Not in the existing MOU. We made every effort to make relationships at the career civil service level. They are still there and all our friends at the top are gone. And there are some positive signs. Martinez is interested in Managed Growth not smart growth. And he has convened a task force inside HUD to figure out how HUD is going to work on that. We are now talking about leading with the strategy and building whatever federal partnerships we can.
SDL: Let's talk about fair share affordable housing, gentrification, and displacement. If your goal is to do something about concentrated poverty and residential and racial segregation and exclusionary zoning, it makes sense to focus resources to see that affordable housing gets built in the suburbs. However, I have heard bitter arguments over how resources are divided in that there are too few resources for affordable housing. Some ask if these scarce financial resources for affordable housing should be squandered on building at high cost in the suburbs. The inner city and inner ring suburb advocates say let's do it here because then, at least, we have some development going on. Do you feel it is an either or choice?
SAP: We do both. We have a strategy that is regional. In Atlanta there is an effort to affordable housing outside the city; whereas in the Bay Area CCII is operating in the poorest neighborhoods. So not only do you not have to choose, you have to do both. The city has to work otherwise you have this enormous pressure outwards including poor people pushing out. So you have to make existing neighborhoods viable, livable, diverse, and with strong economies. And you also have to acknowledge that we are not about to end sprawl.
I want to describe a set of economic tools that we have created that speak to some of these issues. We are interested in finding ways to tweak the market place so that we get a more equitable and sustainable outcome; and for the true economic value of the city to be recognized. These issues are both economic and structural. We look at energy and time efficiency. We try to get innovations by rubbing groups and technologies against one another. The first [of theses tools] is called the Location Efficient Mortgage. (LEM) The second is car sharing which we are launching this summer and the goal is to do a large scale program. It is design for people who primarily use walking and biking and transit as their primary mode of transportation but who need an auto every now and then. They may own one for that purpose but this allows them to get rid of that car. This allows them to go pick one up for a day or an hour. The cars are parked near a drugstore parking lot. You call up or reserve the car on the web from 3 to 6 so you can go pick up your sofa. At the end of the month you get a bill for car services based on time and distance traveled. For people who drive less than 7,000 miles a year it is cheaper and it reduces the number of cars on the street. This exists in Europe on a large scale in Switzerland and Germany. They have very small cars. We are bold or crazy enough to try to do a large scale system. We have some Congestion Mitigation money, about $500,000, to launch it as a research project. So we have been looking for capital. We hired a retired conventional businessman, 62 year-old PhD, CFO for a telecom company. It will be a complex structure and have a for-profit component to it. We lease the cars and car services. We are basically a booking agency. There is one of these already up called Zip Car in Boston.
The third tool is called Connections for Community Ownership and takes advantage of the cumulative untapped buying power of low-income neighborhoods. We are for transit oriented development and work with neighborhoods to develop transit oriented plans. But then, where the hell do the businesses come from? We have created this intermediary and it links franchisors that have a success rate of 90 percent or better with their franchisees and sell things that the community wants and that are interested in coming into the inner city with minority entrepreneurs. There are 3,000 franchise organizations. They have to report to the FCC on what their success rate is. We are screening for those that are 90 percent successful [in terms of their franchisees staying in business] and then we do due diligence. We chose a set of them and we now have 12 franchises such as Kid to Kid, which sell recycled clothes; Postnet, which is a cross between Mailboxes and Kinkos; Coffee Beanery, which sells coffee and sandwiches; and Signerama, which make signs. [We are targeting this in] neighborhoods that are well transit served, that generate foot traffic, and [that have] minority entrepreneurs who have the skills to open a franchise but not the capital. And [we are looking to assemble] a $2 million fund for up to two-thirds of the equity required in these deals.
SDL: The idea here is to get businesses that have a high likelihood of survival that the local community wants, and are minority owned to locate around transit. Has it begun?
SAP: Yes. We have six deals under our belt. It is going much slower than we thought but it is going. From a community economic development standpoint this is the advantage. When I do a usual CDC deal I hold this person's hand forever. So I top out at two or three deals a year. This is a deal where the franchisor will hold the hands of these people and they know how to hold the hands a whole lot better than I would because they have the system. So if you can get it going you can do a large volume because there is no follow through [required]. You just have to get your loan back. But there is an enormously sophisticated support service for these businesses that is business specific.
SDL: If a neighborhood says they have no copying services. Do you say we have a franchisor we can bring in to do that? And how do you get the real estate?
SAP: The initiative is with the minority entrepreneur. We are out in the community telling everybody about this. But we are not asking them what they want. We are asking them where your entrepreneurs are. That is the limiting factor. You find the entrepreneur and say here are the 12 options, which one do you want to do and where do you want to do it.
SDL: So it is not the community saying this is what we want. It is the entrepreneur.
SAP: We chose businesses that we know will fill a vacuum in a neighborhood. But the driver is the entrepreneur and it is damn hard to find them. We do this in partnership with five downtown banks and it is agony because they are so risk averse. This is their CRA phase so they are more engaged but it is really hard. Not only is it hard to find the entrepreneur, they have to have some capital. Ordinarily the deal is 30% equity, 70% financing. We are saying of the 30% equity our fund will put up 20% and the entrepreneur puts up a third or 10%. Half the people who have gone through didn't need our money what they needed was the screening of the franchises; the other half needed the money. There are a couple open. One Signerama opened down the street. That one is in a partnership with Hispanic Housing.
The fourth is the Community Energy Cooperative. This is, in my opinion, the most interesting and challenging strategy we have ever cooked up. You may remember from your conversation with Scott [Bernstein] that ComEd was our nemesis for years. They are nuclear-based [utility] and they oppose energy efficiency, they oppose co-generation, and they did everything bad from our perspective. And they disinvested from the distribution system so we have had brownouts, blackouts, fires. Deregulation went through in the state legislature and the Board threw out the whole management of the company. Once deregulation happened and there was a marketplace the utility had to deal with competition and worry about marginal costs, a previously unheard of issue in regulated utilities. They got a new guy who had done some interesting stuff with environmentalists. His name is John Rowe. So Scott [Bernstein] and the new CEO went in and talked with him and we formed a partnership with him. The utility faced to key issues in Chicago. One is that there has been a long term disinvestment in the distribution system so there are lots of places where there is a substantial mismatch between the distribution capacity and the demand for electricity in the neighborhood resulting in brownouts. The other is this peak electric demand problem where in the summer they have to be able to deliver to the highest demand when there is a big load and they have to be able to take care of those peaks.
What we said to them was in this new environment you no longer have these rate classes where all residents were more or less the same and all commercial was more or less the same. You have to look at your utility as a bunch of micro-grids with different economics and cost structures and different capital requirements and where you can target your resources where there is the highest marginal benefit. That is important to us because here on the fringe of the region the marginal costs are very high and that was always rolled into the rate base. It was averaged in so they didn't care. So if they spent $10 here and $1,000 there it made no difference.
SDL: My understanding is that low-income utility rate payers in the inner city have been subsidizing the higher-income residents of the suburbs.
SAP: They have been for years...big time. So now they have to pay attention to both the reliability of these micro-grids and also worry about the marginal costs of them and they have to deal with the peak problem.
So we said, OK, let's identify some number of communities in the Chicago Metropolitan Area where [the utility] has a reliability problem. We [CNT] will go in [to these areas] and we will decrease demand. You pay us for the decreased demand on a performance basis. So we stared off in Pilsner, which is an Hispanic neighborhood in the southwest side, Mexican American, as in Pilsner Beer. We went in and got 1,500 people to join this cooperative and we swapped out 500 old air conditioners put in new ones and measured the change in demand. ComEd pays us for the difference. So these people are swapping an old air conditioner for a new one and in the beginning we paid all the costs. Now they are paying something but it is way below market price like $50 to $125 for a new air conditioning unit that is worth $200 to $400. We are able to pay that difference from this flow of revenue from Commonwealth Edison for reducing demand. We are doing it in places where reducing demand improves reliability.
We have a rebate program for commercial lighting in these same communities. We look for larger [commercial] users and organize them into a curtailment program and we help them set up the program so that on 30 minutes notice they can decrease their demand by turning their air conditioning down or turning the lights off or turning that motor off or sending people home [from work] and they are paid handsomely for that. They sign a contract and say I get to draw up the 30 megawatts of capacity from you whenever I need it and I will give you 30 minutes notice. We will decrease demand by 30 megawatts on 30 minutes notice. We can track the results on a computer. We have contracts with these people. This is all worked out in advance. You are a municipality of Niles, we sign this contract, we work out with you what your program is going to be and what its demand reduction is and we give you a contract for that and we promise to pay you an amount for each kilowatt of proved out capacity. Some companies get $60,000 checks. Curtailment is only done with large companies or a municipality or turning out every other light. Some companies send people home from work. Or they moved to the night shift or whatever. They have different strategies. We work it out with them but they are under contract to deliver that. We have now expanded to four communities. It is called the Community Energy Cooperative, Commercial Industrial Curtailment Program.
The Pilsner program now includes Little Village, the next neighborhood with the same population. We have added three other communities, Elgin, Park Forest, and some neighborhoods on the northwest side of the city all of which have reliability programs. And we are now ramping up to have 35 megawatts capacity. We bought 5,000 air conditioning units and we are swapping out 5,000. From the community standpoint I not only get a new air conditioning unit, it works better, gives me more comfort, and my electric bill goes down and it costs me very little, and it helps with the reliability of the power supply. We also swap out thousands of incandescent light bulbs for florescent bulb, we sell energy efficient refrigerators at cost, and we have an experimental program on small scale gas turbine generators. It is a little like marrying the bank because there is no necessary limit to this. The demand for power in the summer is going up, the cost to the utility [of providing the peak time power] is going up, and there are an unlimited number of old air conditioning units. The limiting factor here is our capacity to swap out 5,000 air conditioning units and do all these other things. Commonwealth Edison gave us a three year and $15 million contract to put the capacity in place plus these performance payments. We have it last year, this year, and next year and then we are on our own. We subcontract different pieces of it out. We have the units in two different warehouses. The people who do the swaps, some are on our staff. It is a considerable employment opportunity. Scott [Bernstein, president of CNT] wrote called the "The Hidden Assets of America's Communities and Regions. It lays out the argument for investment in cities and their intrinsic efficiencies. Michael Porter wrote about this also.
There is an intrinsically urban rationale for all these programs. They all address the issue of equitable growth. They are all trying to incentivize urban living, particularly if you are at the low end. If you look at the economics of buying [a home] in the city or on the fringe the fringe is cheaper. But the hidden tax is a car per adult [because if you buy a home in the suburbs you will need a car]. So what the location does is it equalizes it. [This is the premise from which the Location Efficient Mortgage was born.] We think that in addition to these policy initiatives through PRL, there are specific economic strategies that can take advantage of these urban characteristics and bring dollars to the inner city and existing communities. And do so through the market place. Location efficient mortgages are vended by mortgage companies.
SDL: If Myron Orfield were here he would say this is great but it is a project by project as opposed to an institutional approach. What this means is that you will have to repeatedly create these project specific programs.
SAP: But I got some as opposed to him. How many regional governments has he catalyzed around the country? None.
SDL: How about Portland and Minneapolis. He would argue that metro-regional governments are coming into being because the inefficiencies of the fragmented governance of these regions will make them less competitive.
SAP: And there is a regional organization pushing for it here. Metropolis 2020 is the progressive government group and we work with them a lot and regional government is on their agenda. Only their regional government involves shaping the region through financial incentives. They are pushing for it but it will not happen in my lifetime.
SDL: A lot of development around the country is economically segregated. In reading Privatopia by Evan McKenzie it is clear there are 8 million people now in gated communities and 42 million in home owner associations. Looking down the road it looks like we will have rather large enclaves where there is no low income housing
SAP: Right, all the land is used up.
SDL: There are whole counties with no multi-family units. So this project by project thing is working but how does it speak to exclusionary zoning?
SAP: There is another strategy I forgot to mention. We have a regional vision that is Transit Oriented Development. We don't want to put low income people in that gated community because every adult in that community has to have a car. So we have this partnership now with the Great America Station Foundation that Hank Ditmar runs. It is a foundation that was funded by Amtrak. It started off aiming at redeveloping all the old Amtrak stations. Now it is interested in being a hub for transit oriented development. We are now in a strategic partnership with them and we are focusing in on a community that has been working to do transit oriented development. We want to bring in a team of national people and do a regional workshop on transit oriented development The vision we want is for low income people to be sitting next to the metro stops and El stops not in the gated communities because as the cost of fuel goes As a result, we think it is positive to put people in places where they can use transit and where they can be part of community that is diverse and where there will be mixed income.
SDL: Orfield says that there are a lot of cities with a huge amount of affordable housing or at least a disproportionate amount compared with the suburbs. So what you need in the city is some higher-end development if you are going to end up with a mix. But then of course you get the gentrification and displacement problems.
SAP: There are two different kinds of people in these communities and they really are in different positions. There are the home owners and the renters. The homeowners may complain because their taxes go up but their equity also goes up. In Chicago there is a program for those who can't pay their taxes. If it goes up by more than 25% you can get a no interest loan tacked on to your title so it is paid when you sell. There are adaptive mechanisms that can deal with that. The real problem is with everybody who doesn't have that equity. They are out. The Hispanic population in this neighborhood has dropped 10% in the last decade and it will drop more.
I think you have to find ways to vest people in housing. Anything less than that is just going to be palliative. And that costs a lot of money. The majority of Aldermen in the city of Chicago fight these things. In this neighborhood the Aldermen will not permit coops. He doesn't want these people [low-income minority residents]; he wants them to go. And there are a lot of Aldermen who think that way so you are not going to get them [to help]. Often the city either owns the property or you can only get it through the city because of tax arrears. So the political obstacles are sometimes the most difficult.