Banking a Billion

My friend Tom Jones of the Smart City Memphis blog recently forwarded me a very interesting presentation from CEOs for Cities and done by Portland economist Joe Cortright.

The CityDividends report looked at certain costs and savings associated with three components it referred to as talent, green, and opportunity (basically education, transportation, and poverty) in the 51 U.S. metro areas with more than a million people.

The question: If those components could be transformed, even very marginally, how much of a difference could it make?

The answer: $166 billion.

And $1.3 billion annually in Memphis.

Those economic gains could be achieved by:

1. Increasing the four-year college attainment rate by 1 percentage point
2. Reducing the vehicle miles traveled by one mile per day per person
3. Reducing the poverty rate by one percentage point

(The report makes clear that the study focused on the quantifyable benefits only, not the policies or programs that it would take to get there. BUT I think the CityDividends report shows how even a small change can make a big difference.)

For instance, Memphis had the highest poverty rate — about 18 percent — of the 51 metropolitan areas surveyed.

But if the poverty rate could be decreased by one percentage point here, the study says the economic gain would be $109 million.

The study hypothesizes that households living in poverty are a driver of public service costs and thus, reducing poverty, even by a percentage point, would reduce public sector costs:

"Each additional person in poverty is associated with $8,200 in spending on poverty-related programs for the entire metro area," the presentation says. "These savings come from shifting the entire distribution of income, not just moving a few households out of poverty."

When Cortright was in town last year to kick off the Sustainable Shelby intiative, he talked about how driving fewer miles meant savings in citizens' pockets ... and that equals more money that can be spent elsewhere.

That can be achieved by people simply driving less or carpooling, or, for a longer-term solution, building things closer together.

According to the study, if Memphians could drive one mile less per day, the area would reap a dividend of $232 million a year.

"Each vehicle mile traveled costs about 50 cents, including fuel, maintenance, and capital costs. At current gas prices, fuel represents about one-third of total vehicle costs," the presentation says.

In terms of education, the study makes the case that better-educated cities have higher incomes, better-skilled workers are more innovative and productive, and that each 1 percentage point increase in college attainment is associated with a $763 increase in per capita income for the entire metro area.

Of course, yes, the question now is how to attain some of these dividends. But having quantified economic benefits associated with the components — rather than just "drive less, it's better for the environment and it saves you money" — should make pursuing them all the more attractive.