Trenton Redux

Empty at the Core

2006-03-06T12:58:00.000-05:00

Proponents of the status quo in the Artworks building go to great lengths to obscure a central fact, which is that Artworks has failed to operate any meaningful programs of its own since 2002.

Artworks defenders will attempt to dismiss this as another example of empty rhetoric. They'll point to the MCCC's program, and those of community groups. What they don't acknowledge is that these groups are operating without any substantive support from the Artworks organization (other than receiving the keys to a building which the City is paying for).

The fact that Artworks itself isn't generating value is at the crux of why the City wants to redevelop the space. If Artworks were operating its own programs, had a full time executive director, were raising money effectively (say to the tune of $1 million/year, to justify a city subsidy of $170,000) it would be an entirely different story. Artworks could target a small fraction of the programs and resources they generated from their efforts to benefit the residents of Trenton directly, and few would question their right to remain in control of the space. The fact is, Artworks is not doing any of those things. So, the City feels it's getting a bad deal and wants to make a change. Most taxpayers in Trenton agree with them.

If there's any doubt about the emptiness of the Artworks facade, try going onto the Artworks website: www.artworksnj.org This has been the organization's "domain name" since 1996. When I did it a few minutes ago, I received this in response:

What it tells you is that the domain name expired on February 4, and no one from Artworks seems to have noticed. On March 14, the domain name will be thrown back into the general pool, and theoretically could be lost forever. Hopefully, between now and then someone from Artworks will renew it. It will cost them $34.95 on a credit card to renew for a year, and a few minutes of time.

Recognize that on February 4, within a few hours of the expiration, any email accounts based on the artworksnj.org domain would have stopped functioning. Similarly, anyone hitting their site would have gotten the same screen I did.

Clearly, NO ONE is using the Artworks website or email addresses, or they would have renewed the domain already. The fact is, no functioning organization could ever afford to give up a domain name with 10 years "brand equity" built into it. Even if you intended to change it, you'd keep the old one around so you can forward emails and web hits from folks who still used the old domain.

It makes no sense, until you realize that there's nothing there.

Parking Realities

2006-03-05T16:41:00.000-05:00

When pressed about why the Artworks building is so underutilized, the more thoughtful among the defenders of the status quo point to the lack of parking on the site as one of the key problems. However, in the same breath, they will hint that a solution to the problem may be around the corner, and suggest development of the Artworks building should be postponed until the parking issues are resolved.

It's a plausible sounding argument, and one that reasonable people can accept. Until you understand the economics. At which point, I believe, reasonable people will conclude that the current Artworks parking problem is unsolvable, unless you're ready to grant even larger subsidies from the City to the organization.

Right now, there's plenty of parking for Artworks in the evening and weekends. The problem is that limiting operations to these hours alone perpetuates the inefficient use of the space we see now, and results in unacceptably high costs (e.g. $467 per MCCC student in the Spring Term).

To improve the situation, Artworks needs dedicated parking spaces during the weekday hours. Since this use competes with all of the other demands in the area for parking, one way or another, someone is going to have to pay for it.

Let’s start with a simple question. How many parking spaces does Artworks need? To fully utilize the 8,800 square foot facility, you’d probably want around 100 spaces (e.g. 9 classrooms x 10 students + 1 teacher).

The going rate for indoor parking garages in the City of Trenton is $120/month. Is Artworks going to come up with $12,000/month for parking?

Of course, Artworks could say they don’t want that many spots. They could argue for 50, or 25. But now they’re accepting maximum utilization of 50% or 25% during the day. Since they’re not going to use the facility even that much most of the time, they’re now starting to slip down that same slope (underutilization) that we were trying to avoid in the first place. And they’re still out $6,000/month, or $3,000, neither of which they have.

Again, where will Artworks get the money?

Why not have the garage operator subsidize the Artworks parking spaces out of his profits on the other spaces, as a requirement for operating the lot?

Sounds like a good idea. Unfortunately, at $120/month, there are no profits.

A high-density parking structure cost costs a minimum of $15,000 per space to construct. A 30-year mortgage payment on $15,000 at 7% is over $100/month/per space all by itself. Add in operating costs including insurance, property taxes, security, electricity, administration, and the cost of collecting revenues. At $120 per month you’re losing money even if every space is occupied (which they won’t be). Raise your prices above $120, and more spaces will go empty as drivers park elsewhere or carpool, or potential tentants decide to locate their offices elsewhere.

The fact is that the City of Trenton is already subsidizing every parking garage being built in the city, even when every space is being leased at $120/month. Put an additional burden of supporting the Artworks parking requirement, and it will simply increase the subsidy requirement.

In other words, the City pays. Have a familiar ring?

The other way the Artworks board could be dealing with this problem would be to recognize that the current facility simply isn’t cost effective for the use Artworks intends, and is never going to be. Then it would make sense to focus the stakeholders, the community of artists, as well as local residents, on finding alternative spaces that would allow the programs to continue at an affordable cost.

Lies, Damn Lies, and Statistics

2006-03-02T18:45:00.000-05:00

The Artworks blog today took exception to our comments reported in the Trenton Downtowner. Our estimate of the City of Trenton's $168,000 cost to the preserve the status quo was dismissed out of hand. The blogmaster opined that I'd simply made the number up: "The best statistics are the ones you make up yourself....Having dreamed up some numbers, he [Goldstein] is now outraged by the numbers he dreamed up."

In "Economics are a Bummer" we explained where the number came from: a combination of direct city-paid operating expenses and foregone tax revenues.

The majority of operating expenses we identified were simply utility bills. We estimated $60,000 of the $90,000 total for utilities. The actual average over the last 3 years has been $3,900/month, or $47,000/year. Recently the rates have been going up. Perhaps Mr. Rostov hasn't noticed.

The other component was foregone tax revenues. We estimated $80,000 from the units based on a total $2 million valuation (8 units x $250,000 x 4% property tax rate).

Perhaps that's where I went wrong. On February 9, Mr. Rostov published an estimate of the market value of the units as $2.7 million. So based on Mr. Rostov's estimates the city isn't foregoing $80,000 in property tax revenues, it's $109,000 ($2.7 million x 4.03%).

By Mr. Rostov's calculus, the city's actual subsidy is therefore $199,000 per year, not the $170,000 we claimed. This works out to $544 per MCCC student in the spring term.

I stand corrected.

Public Subsidies for the Arts

2006-03-02T17:39:00.000-05:00

The City of Trenton's subsidy of the Artworks building is a major expenditure for a city of 85,000 souls. In "Economics are a Bummer" we estimated the direct cost to Trenton taxpayers of $170,000 a year. That worked out to $467 per student in the latest spring term.

Even a die hard advocate of public arts subsidies should recognize that this is a shaky value proposition for the taxpayers of Trenton. I am, and I do.

By this analysis, I do not intend to dismiss the real benefits of the college’s presence it Trenton. I also respect the contributions of people like Lisa Levine and Lisa Kasabach, who invest enormous energy and skill into this community. But it does point to the current arrangement’s absurdly inefficient use of public resources. In the end, this should be about programs, not buildings.

HHG is working with the city and county to find alternative spaces for the college and community groups that would allow the existing programs to continue at a much lower cost to the taxpayers. If the Artworks board would stop the political fight to save their tenancy in a specific building, and instead focused on the public dialog around how to save the programs, by helping find alternative, more-cost effective spaces, this process would move much more quickly.

Indeed, if you favor arts funding you should oppose the current subsidy of Artworks as bad public policy. At the heart of the rationale for public arts funding is the idea that it catalyzes additional funding from corporations, foundations, and individual contributors.

For example, the NJ State Council of the Arts (NJSCA) web site proclaims: “Historically, grant recipients over-match the Council's funding nearly 15:1.” NJSCA sets a limit on operating grant requests at 25% of an organization’s total operating budget. Operating grant awards are rarely more than half that, around 12.5%.

If we take the Artworks board’s request at face value, the City of Trenton is being asked to provide an operating grant to the Artworks organization.

But where's the match? For a public grant of $170,000, you’d expect to see an arts organization with an ongoing annual operating budget of approximately $1.36 million. If Artworks had such a budget, and devoted even a small fraction of it to directly serving the Trenton community, the City wouldn't be looking to develop the site. Certainly HHG wouldn't be engaged in redeveloping the building.

However, Artworks won’t be able to show even a tiny fraction of this activity, because the organization effectively ceased operations in 2002. This is the uncomfortable reality of the situation.

If the Artworks board made the same demands in a grant application as they’re making on the City of Trenton, it would be rejected out of hand.

Economics are a bummer

2006-03-02T15:34:00.000-05:00

I love Trenton and my home in Mill Hill. I'd also like a beach house on Block Island, and a villa in Tuscany. Unfortunately, I can't afford those things. Economics are a bummer.

Proponents of the Artworks status quo seem blissfully unconcerned about economics. Nowhere in the debate on the other side does there seem to be much recognition that the taxpayers of Trenton are making a major investment in the facility, and have the right to demand a fair return.

How big is the subsidy? Expenses include:

Utilities. Have averaged $3,900 a month for the past 3 years. However, utility rates have increased substantially in the last year (we’ve been lucky it’s been a mild winter, so far). The commercial rate for natural gas in December was almost 2x what it was a year ago. Prices have fallen back a little bit, but who knows for how long? So, going forward, it's a very good bet it's going to be a lot more than $3,900/month. We've estimated $6,000/month, which we think is a fair guess.

Repairs. When something blows out (building was outfitted nearly 20 years ago) the city pays. Figure $500/ month

Miscellaneous – e.g. sewer, water, insurance (the city self-insures, but has to pay an administrative fee to a 3rd party), routine maintenance, figure another $1,000/month

So direct expenses will probably run about $7,500/month, or $90,000/year. Not counting, of course, the major capital repairs which the building needs.

But let’s not forget the city’s loss of revenue from the site. When the city originally leased the building to ArtWorks for $1/year, Mill Hill was a transitional neighborhood. There was no economic value to speak of, so no loss to the city. With the success of Mill Hill, this is a very valuable property. Figure 8 units x $250K value x 4% = $80,000/year in lost tax revenues.

So, altogether it's costing the city roughly $170,000 per year to maintain the status quo.

Now, $170,000 is just a number. It’s a lot for a car. It’s a little for a good house (my dream house in Block Island would cost a lot more). What gives it meaning is the value received for the money spent.

Trish Fagan, director of the ArtWorks program for MCCC, was quoted in the Trenton Times as saying that 150 students attend the college's program. The “Spring” term covers the period from January through May. That's 150 days or 41% of a year. During that period, the City of Trenton subsidized ArtWorks to the tune of $69,863.

If there were 150 students during that period, the subsidy was $467 per student. Is that good value?

I doubt many Trenton taxpayers would think so. These are overwhelmingly non-credit courses (21 of 24 courses in the Spring term). The students themselves are paying about $25 per session plus materials fees.

Why do the operations cost so much per student? It's not a mystery: the facility is grossly underutilized. This is, after all, an 8,800 square foot facility. You'd figure it would support at least 9 classrooms. Figure the spring term is 19 weeks and could theoretically be used 60 hours/week. This availability translates to a total capacity of 10,260 classroom-hours.

Yet the entire spring schedule for MCCC in artworks, every session of every course, amounted to 867 classroom-hours.

When your costs are fixed, it's hard to be cost-effective with 8% utilization. Economics are a bummer.

"Redux" (v.i.): To Bring Back

2006-03-02T09:33:00.000-05:00

Trenton was once a regional and world manufacturing center, not simply the capital of New Jersey.

In recent years, it has been seen as the anti-center: the dumping ground for people left out of the boom in the surrounding Mercer and Bucks counties.

But underneath the surface, something quite remarkable has been going on. People have been returning. People turning away from the sterile anonymity of the suburbs. People who choose to live here: looking for a sense of place, a community, a neighborhood such as their parents grew up in, yet they feared was lost forever.

Trenton is coming back.

Blessedly, the cornfields in Plainsboro and West Windsor can't be cut up anymore. The few that remain are increasingly shielded from development as "open space". So the relentless logic of population growth dictates that further development must become more concentrated. Despite itself, after 40 years of neglect, New Jersey is rediscovering the advantages of the city center.

This blog will be about this journey. It is told from a particular perspective as someone who has chosen this route personally (I moved to Trenton from Princeton 3 years ago), and who even more recently has decided to bet his career on it (I'm now a partner in a real estate development company focused on Trenton development).