The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
■S'1- - * V t a. [ f-c 'k j i ^ Y i (J FEDERAL RESERVE HANK DF Monthly Heview In this issue New Towns vs. Old Problems Quotas on Foreign Steel N ew Towns vs. O ld Problem s . . . The U .S. will add about 100 million people by the turn of the century . . . how many of them will new towns accom m odate? Q u o ta s on Foreign Steel . . . A new quota agreem ent covering foreign steel imports could result in an I I-percent reduction in imports in 1972 alone. Editor: W illiam Burke July 1972 MONTHLY REVIEW New Towns vs. Old Problems he passage of the Housing and Urban Development Act of 1970 demon strated Congress’ concern over the continu ation of “established patterns of urban devel opment” and the impact of rising population upon economic and environmental balance, including the migration and growth trends which reinforce existing disparities between urban, suburban and rural areas. The legis lation envisioned new communities as one device for a ch iev in g a more “balanced” growth which would in turn “preserve and enhance both the natural and urban environ ment.” This development thus climaxes a renewed interest in “new towns” as a solu tion for long-standing urban problems. T New towns not new Interest in new communities of course is not new; evidence of town planning and con struction for special purposes has been found in many places throughout the ancient world, including India, Persia, Egypt — and espe cially Greece, where settlements in outlying areas were established at least partly to ac commodate population increases in the prin cipal city-states. In the United States, one of the earliest efforts to build a totally new city—Washington, D.C.— involved the cre ation of a public agency which was empow ered to formulate a development plan and to acquire 5,000 acres of privately held land for resale to those who agreed to conform to its land-use specifications. In laying out the specifications of the nation’s capital, this plan reserved substantial acreage for open space, streets, parks and public buildings. During and between the First and Second World Wars, a number of new towns were built for special purposes under government sponsorship, such as Oak Ridge, Tennessee, Los Alamos, New Mexico and Richland, Washington (atomic bomb manufacture), Norris, Tennessee (TVA), and Boulder City, Nevada (Boulder Dam ). More recently, interest in new towns has centered largely on Reston, Virginia and Columbia, Maryland —private ventures started in the late ’60s and projected to accommodate populations of 75,000 and 120,000, respectively, when finally completed. By one recent count, however, some 130 new communities of one type or another (but at least 1,000 acres in size) either have been proposed or are under development in this country, and 5 8 of those 130 towns are in Twelfth District states. Nonetheless, probably the most ambitious of the new-town efforts during the postwar period have centered in the United Kingdom, where some 30 new towns have been built with a high degree of governmental direction and financial support. T he B ritis h new towns, with an emphasis upon green belts, community centers and other social amenities, reflect the views of Ebenezer Howard (18501928), who sought in his day to combine the “best” ingredients of urban and rural life 3 FEDERAL e North glen ( Washington) © Padilla Bay (Washington) ® Cedar Hills (Oregon) & Somerset (Oregon) RESERVE BANK OF SAN FRANCISCO in the West (Actual ©r Planned) Sea Ranch M arincello Foster Cii d>e> Redwood Shores, Hawaii-Kai (Hawaii) Mililani Town (Hawaii) 4 July 1972 MONTHLY into new planned communities as an alterna tive to the squalor and congestion of the large industrial cities. Located at sufficient distances from exist ing towns to be as self-contained as possible and not merely extensions of suburbia, the new towns have been designed to siphon-off population from London and other large cities. They are expected to absorb a sig nificant portion of the 20-million increase in the U.K.’s population projected by the turn of the century. Similar U.S. concern over the ability to absorb future population growth has led to renewed interest here in the new-town move ment. In particular, the 1970 legislation was influenced by the National Committee on Urban Growth’s recommendation that 100 new cities of 100,000 population each, and 10 new cities of 1 million each, be created to accommodate 20 million of the additional 100 million people expected by the turn of the century. Perhaps 3 Vi million of those 20-million new-town dwellers would be ab sorbed by the 58 new towns now being built (or planned) in Western states. W hat new towns? “Variety” is perhaps the best word to use to characterize new towns, or new commu nities. They come in all shapes and sizes, from the 93,000-acre Irvine Ranch in South ern California with a projected population of over 400,000, to the 2,600-acre new town of Riverton, New York, with a projected population of 25,000. There is, in fact, no unanimity of opinion as to what actually constitutes a new town, partly because they exhibit such a wide variety of sizes, locations, functions and land uses. (One observer has described new towns as essentially “a vehicle for defining and synthesizing a variety of pro posals for the improvement of specific prob lems of environment.” ) T he a rg u m en ts commonly advanced on behalf of new towns REVIEW run the gamut from considerations of aes thetics and the environment to economic efficiency and the implementation of various social goals, with “balance” as the central theme. By its very nature, the totally pre-planned new community can schedule the orderly location, timing and sequence of develop ment by coordinating the construction of housing, commercial facilities and commu nity infrastructure (utilities, transportation, education, recreation and cultural facilities) into a harmonious whole. Unlike the smallscale developer who is not responsible for the environment in which he operates, the new-town developer can and should be con cerned with the total environment and with the optimum sequence of development. By planning ahead and thereby guiding devel opment, he can avoid both the visible and invisible costs of sprawl. In contrast to the present patterns of urban development, which are characterized by a progressive spread of low-density build ing over the entire landscape, the cluster development which is integral to new-town proposals should result in an overall land use which is not only ecologically balanced, but more economical. Unit costs are lower, for example, if 3,000 residences are built sequentially on 50 acres than if the same number are built in increments of 60 on 50 separate sites. This is considered a particularly impor tant objective on the fringes of metropolitan areas, where unprotected open lands and agricultural areas easily succumb to the pres sures of expanding population. The largescale approach of new-town planning also would overcome the problems associated with urban-renewal and Model Cities pro grams, which are frequently criticized for failure to achieve their expected impact be cause of concentration on relatively smallscale, fragmented projects. 5 FEDERAL 6 RESERVE BANK W hy new towns? Although the U.S. does not yet have a comprehensively defined national urban pol icy, new towns are considered a means of implementing a number of specific social goals which have emerged over the years. These include an increased degree of popu lation decentralization and an in c re a s e d degree of dispersion within existing metro politan areas, as well as the provision of more and better job and housing opportu nities for minorities outside of the urban ghettos. By siphoning off in-migrants who would otherwise congregate in the cities, new towns will help relieve the mounting problems of congestion in the main urban centers. Present urban centers are believed by many economists to suffer diseconomies of scale. Conclusive proof is lacking, partly because of the unavailability of adequate measures of the full cost of such factors as pollution and congestion, but some evidence exists to support the view that per capita costs of various public services (police pro tection, sanitation, education and transporta tion) are substantially higher in very large cities than elsewhere. In 1970, for example, per capita taxes and expenditures for public services in cities with populations of 1 million or more were double th o se of c itie s in the 300-500,000 size bracket, and over three times those of cities in the 50-99,000 size category. In the view of the New York Urban Development Cor poration, “Congestion New York scale saps not only humans but their institutions, as the almost daily crisis in local and metropolitan services demonstrates.” A related goal of many new-town projects is a high level of self-sufficiency, which would reduce the need for long-distance commut ing for work, shopping and recreation, there by helping to relieve congestion in the main metropolitan areas. To the extent that they OF SAN FRANCISCO are self-contained, new towns may also make it easier to establish a sense of community. Their residents allegedly will be able to effect a greater degree of community participation and at the same time maintain an identity that otherwise would be suffused in the social vortex of the metropolitan core cities. In addition, new towns might serve as testing laboratories for urban innovations. They provide a chance to experiment with innovative designs in residential, commer cial and industrial architecture, as well as with new transportation systems and new methods of public administration and urban management. In the process, they provide an opportunity to develop solutions to the problems affecting the core cities. On sev eral counts — economic, social and purely structural — new towns thus can represent an exercise in thinking in metropolitan terms. Independents and satellites Other features such as size and location help to distinguish new towns from tradi tional builder developments. Size is one; while a large subdivider or builder seldom develops a single parcel of more than 1,000 acres and 2,500 units, new towns average about 10,000 acres in size. A standard defi nition is at least 1,000 acres planned for a minimum 3,000 to 4,000 residents and suffi cient supporting facilities, activities and uses to constitute a complete community. Yet another basis is location, or more par ticularly, relative distance from established metropolitan centers. Depending upon their im p le m e n ta tio n of certain specific goals, four types of new town—independent, satel lite, peripheral and in-town— are recognized by the Department of Housing and Urban Development as eligible for various kinds of Federal assistance. © The independent or free-standing new town is located beyond commuting distance from another major urban center and is envi July 1972 MONTHLY sioned to be relatively self-sufficient, with an eventual population of 250,000 or more. A city planned as part of a national-settle ment policy — such as Brazil’s capital of Brasilia — would qualify as an independent or free-standing urban entity, as would have Salt Lake City or Fairbanks in their day, had they been comprehensively planned. Today, Lake Havasu City in Arizona (new home of the London Bridge) and the large Irvine Ranch project in Southern Cali fornia might qualify as independent new towns. The latter project has allocated 1,000 acres of its 93,000 acres to educational purposes, through the donation of land for a local campus to the University of Califor nia, and has allocated 66 percent of the re mainder for residential purposes, 26 percent for industrial-commercial uses, and 8 per cent for open space. It is expected that 90 percent of the jobs in the completed project will be held by residents. • Satellite new towns are located within commuting distance of a major city, usually on sparsely settled land devoted to agricul tural uses. (Most proposed new towns fall into this category.) The p ro to ty p e s are Reston, Virginia, some 20 miles from Wash ington, D.C., and Columbia, Maryland, mid way between Washington and Baltimore. Reston’s population is expected to grow from its present 10,000 to 75,000 on 6,800 acres; Columbia’s from 15,000 to 120,000 on 18,000 acres. Though different in architectural design — Reston being rather advanced and Colum bia rather conservative— both communities will have relatively high population densities, but clustered in such a way as to leave vast areas to open space. Housing is grouped in “villages” separated by green belts, with each village containing its own shopping center and school, while attractive town cen ters accommodate high-rise office and com mercial buildings. REVIEW Riverton, New York, being developed by a consortium including Reston’s original de veloper Robert Simon, is one of three satel lite new towns thus far declared eligible for Federal support. Planned for development over a 16-year period, the new town will eventually accommodate 25,000 people on 2,560 acres of land near Rochester. About 40 percent of the land will be allocated to housing, 22 percent to commercial and in dustrial uses, and 24 percent to recreational and open space— including a golf course, 12 indoor and outdoor swimming pools, three lakes and a riverside marina. In Riverton, 14 miles of walkways (tunneling under or bridging roads) will link schools, residential areas, shopping centers and industrial parks. A rapid-transit link to nearby Rochester will be developed on the existing Erie-Lackawanna rail line, and between 30-40 percent of the 8,000 residential units will be for lowand moderate-income families, including the elderly. The developer also plans to offer prepaid health care and medical insurance for residents. Other types of towns • Peripheral (“in-filling” ) new towns are established either on the edge of existing metropolitan areas or within the suburban fringe on lands that for one reason or another have been utilized for agricultural, military, or other purposes. In effect, peripheral new towns represent efforts to accommodate, with appropriate planning, over-spill from either the central city or existing suburban areas. One example is Foster City, built on 2,600 acres of reclaimed tidelands in the south western portion of San Francisco Bay, and designed to accommodate a population of 35,000 in a community of high-rise apart ments, garden apartments, townhouses and single-family residences with some commer cial and industrial activity. • In-town new towns are closely related to peripheral new towns and essentially rep- 7 FEDERAL RESERVE BANK resent a form of urban renewal; that is, major developments designed to revitalize innercity areas. One such project will create two new towns on Welfare Island in New York’s East River, with 5 ,0 0 0 u n its of mixedincome housing and an ecological preserve — and no automobiles allowed. It is spon sored by the New York (State) Urban Development Corporation, which has broad powers to condemn and acquire land, to override local zoning and building codes and to float its own debt obligations. Another project under the same sponsor ship eventually will generate 35,000 jobs and house a mixed-income population of 60,000 in a new town to be built over the storage and repair yards of the Long Island Railroad in Queens. Lower levels of the new community will be allocated to parking, vehicle circulation, and industrial space, and the top levels to office buildings, a shopping center and residential buildings. Although the foregoing classification is based upon relative distance from major urban centers, virtually all of the new towns thus far initiated or planned in this country happen to be located within the general orbit of the fastest growing metropolitan regions — witness the heavy concentration in Southern California. This trend of course conflicts with one of the major purposes of new-town development—population disper sion— but it is understandable in view of such factors as access to transportation facilities, the availability of adequate supplies of land, labor and other resources and, not least of all, the potential for population growth it self. Some of the problems encountered in the development process may be understood by looking at the developers themselves. W ho are the developers? 8 In contrast to the British and European experience, the American new-town move ment has (to date) received its greatest OF SAN FRANCISCO organizational and financial support from private enterprise rather than from the pub lic sector. Motivated by the profitable in vestment opportunities in “environmentally constructive ends” — which may include a 20-percent (or more) pre-tax return on in vestment — large landowning and develop ment firms, building firms, oil companies, industrial corporations, insurance companies and commercial banks are to be found in the forefront of the new-town movement. One major type of developer is the large landowning firm, such as the Irvine Ranch Company in California. Originally involved in ranching, citrus and extractive operations, the Irvine Company has turned to new-com munity development to take advantage of the increased value of its land holdings brought about by the growth of the Los Angeles-San Diego area. Similarly, Goodyear Rubber Company has undertaken develop ment of its 13,000-acre L itc h fie ld Park, Arizona, project on land originally bought in 1916 for growing cotton to be used in tire manufacturing. Other large Western landowners, such as Leslie Salt Company, W e y e rh a u se r and Boise Cascade, have gotten into community development to obtain a multiple and more profitable use of their land holdings. In some cases, holding periods of 50 years or more have kept the book value of lands well be low their present market value, offering the July 1972 M O N T HL Y REVIEW potential of major capital gains over time. Large national corporations have become increasingly interested in new-town develop ment. Westinghouse has plans for new towns in Florida and California to serve as markets for large-scale testing of new products. Other companies, such as IT&T (through Levitt & Sons, its building subsidiary) and the Penn Central (through Macco Realty, its South ern California land-development subsidiary) are entering the field as part of their diversifi cation efforts. Oil companies are now major investors, being interested as they are in the riskshelter benefits of land development stem ming from property-tax and capital-gain tax legislation. Sunasco (Sunset International Petroleum), which has acquired a number of building firms and now derives the largest part of its income from real estate, currently is involved in the development of three new communities in California. Gulf Oil, after investing heavily in Reston, has now as sumed control of that prototype community. With the experience of some prototype new towns in mind, some observers have concluded that considerable public support will be required to maintain the momentum of the new-town movement, in view of the heavy “front-end” costs which must be borne by the developer before cash flow turns positive. These costs arise from the neces sity to finance land acquisition, site develop ment and improvement, and essential in frastructure during the lengthy period before any appreciable cash flow develops from land sales, home sales, and commercial and industrial leases. The cost of land acquisition alone for a 10,000-acre new town may approximate $15 million, entirely apart from outlays for financing costs and infrastructure. As for the latter, the cost of Reston’s roads, sewers and water lines amounted to $14 million, while in one California development, a 5 mile access road alone cost $1 million. Serious problems can arise unless the de velopment plan carefully keeps construction in phase with return cash flow, which means that housing availability must be kept in phase with job opportunities, and hence with commercial and industrial dev elo p m en t. Costs mount also as a consequence of the delays that result from dealings with local authorities over such matters as zoning and building-code requirements. The developer usually provides between 5 and 20 percent of the total prospective development cost as his equity investment, with the proceeds being used for land ac quisition, architect and engineering fees and general overhead. Thus, reliance upon ex ternal financing can be both very substantial and costly. The enormous cost of new-town ventures thus helps explain why virtually all of their backers are large firms, and it also helps to 9 FEDERAL RESERVE BANK explain why most new-town proposals are still just that — proposals. Even some large firms have discarded their original plans to enter the field, discouraged by the difficulties of large-scale land acquisition, by the dif ficulties encountered in securing the approval of local authorities with frequently overlap ping jurisdictions, by the high cost of pro viding the essential infrastructure, and by the long gestation period required for a pos itive cash flow to develop. (Some economic models developed in connection with specific new-town proposals estimate that full de velopment requires eight years or more.) Consequently, Congress has passed legisla tion to assist new-town development because of its conviction that such ventures are merited in terms of helping to restructure the nation’s future urban growth. Federal support 10 To implement the 1970 legislation, a new Community Development Corporation was created in the Department of Housing and Urban Development, with the assignment of determining eligibility standards for newtown proposals and of serving as a vehicle for extending various forms of assistance. As to eligibility criteria, a new town must be of one of the four types noted above, and in addition, must be “a well planned and harmonious whole . . . economically sound . . . and an attractive place to live, work and play.” Ample provision must be made for open space, as well as for “most, if not all of the basic activities and facilities normally as sociated with a city or town,” including residential, industrial, commercial, educa tional, religious and cultural activities. In addition, the new community must offer equal opportunity for minority-group em ployment, and must provide “substantial” (but unspecified) am o u n ts of low- and moderate-income housing during each phase OF SAN FRANCISCO of residential development. Financial a ssista n c e to qualified new town-developers may take several forms, in cluding up to $500 million overall in debt guarantees. A limit of $50 million is placed on any single project, but otherwise the debt guarantees may cover up to 100 percent of the real-property and development costs in curred by public-development agencies, and 85 percent of the costs incurred by private developers. The act also calls for $250 mil lion in loans and grants to help defray the cost of interest payments for a period up to 15 years. In addition, $168 million (through fiscal 1973) is authorized in loans and grants to help defray the cost of schools and other essential public services during the initial stages of community development, and in special planning grants to help cover plan ning costs and technological innovations such as antipollution c o n s tru c tio n tech niques. Finally, additional funding is avail able through 13 existing Federal agencies for sewers, water supply, open space, mass transportation and other public facilities. Altogether, about $1 billion in assistance may become available to reduce the risk to developers resulting from their heavy frontend costs. To date, Congress has failed to appropriate any funds in support of the loan and grant measures, but the debt-guarantee program is well underway. Thus far, HUD has made $227 million in debt guarantees in support of ten projects designed to ac commodate over 630,000 people by 1990, and the volume of applications for assistance is rising rapidly. None of the ten projects are in the West, however. With adequate Federal funding, the newtown movement could witness a major up surge during the nex t d e c a d e , as private developers become attracted by the profit potential on projects in which a large part of the risk is borne by the Federal government. July 1972 MONTHLY Still, Federal assistance is not without its costs, and some observers question its ef fectiveness in terms of implementing the ob jectives which new towns are designed to achieve. Problems of Federal support For one thing, the cost of filing a detailed application for HUD assistance is consider able— as much as $500,000, according to one study of the San Francisco Bay Area — and the amount of red tape involved is sub stantial. More importantly, while Federal aid can alleviate some fundamental problems such as developers’ heavy front-end costs, it is not presently designed to cope with other factors equally critical to the success or failure of a new-town venture — loca tion, zoning, and the rate of sale of de veloped properties. Land, for example, must be acquired or tied up through purchase or purchase options before applying for Fed eral aid, without any certainty that aid will in fact be provided. And while the new legislation stresses the importance of newtown location, it provides no means for guiding the choice of location; the initiative ultimately rests with the developer. A related problem concerns the degree to which Federally imposed criteria for newtown assistance can be blunted, if not en tirely thwarted, by local-government author ities. The typically fragmented structure and nature of local governments may, in fact, effectively preclude the kind of metropolitan planning and land-use control which is neces sary to control growth on an area-wide basis. For this reason, many observers empha size the importance of state public-develop ment corporations which have both broad powers and access to Federal funding, such as the Urban Development C o rp o ra tio n established by the New York State legisla ture. The NYUDC has the power to con demn and acquire land, override local zon ing and building codes, raise funds through REVIEW the flotation of general obligation bonds, undertake the construction of transportation and other public utilities, and sell developed land to new-town builders. With these pow ers, the NYUDC plans to channel one-third of the Empire State’s growth into new towns during the rest of the century. Other locational incentives might take the form of land-acquisition loans or grants, actual land grants by state agencies, and various fiscal incentives such as propertytax deferrals, investment tax credits, and a c c e le ra te d -d e p re c ia tio n allowances on structures built in publicly designated newcity areas. In addition, some observers ad vocate the establishment of National and Regional Urban Development Banks, which would be empowered to make land purchases and development loans with funds derived from the sale of security issues or from private bank loans. Self-sufficiency and efficiency Still, a number of fundamental problems remain, including the question of whether the commonly stated objectives of new-town development are fully compatible with one another. For example, is a relatively high degree of self-sufficiency compatible with the advantages of efficiency, which derive from specialization? Or is it even attainable? FEDERAL RESERVE BANK It is significant that virtually all of the pro posed new towns in this country are located within the orbit of existing large metropolitan centers. By definition, existing large urban centers not only afford the widest range of opportun ities — economic, social and cultural — but they are also the primary sources of the labor skills and materials upon which new-town developers must rely in implementing their projects. They also are the major outlets for the products of the major national firms, who take transportation costs and other mar ket factors very much into account in decid ing upon the location of their facilities. 12 Thus, while open land in rural areas may be less expensive and easier to assemble in large parcels for development, land improve ment and other development costs may be relatively higher in these areas, due to the cost of transporting to the site the skilled labor and materials which are not available locally. F u rth e rm o re , even in the most h ig h ly -d ev elo p ed new tow ns here and abroad, the goal of a high degree of self-con tainment has proven elusive. A considerable proportion of their residents still commute to nearby urban centers for employment and, at least in Reston and Columbia, still depend overwhelmingly on automobiles rather than public transportation for their transportation needs. Closely related to these considerations is the fundamental question of economic ef ficiency — the question of whether external economies or diseconomies characterize ex isting urban c e n te rs and p ro je c te d new towns. For example, to what extent do ex ternal economies in metropolitan centers offset the external diseconomies which result from pollution and congestion? (An example of the former would be the provision by a city of parks and recreation facilities which are utilized without charge by suburbanites; an example of the latter would be industrial OF SAN FRANCISCO development which creates traffic and pollu tion problems for a neighboring community.) While considerable evidence points to the existence of diseconomies in existing large cities, there have been very few empirical studies of the problem, partly because no accounting system exists which would make possible the accurate measurement of social benefits and social costs. Consequently, the continued location of income-generating activities in large urban centers might indicate that the marginal ben efits exceed the marginal costs incurred by those who make this decision — but it may also reflect a rational response to a pricing system that (1) does not measure the total (or social) cost of such externalities as pol lution and congestion and that (2) requires new firms and residents to bear only the average, rather than the higher marginal cost, of entry. Under these conditions, firms might continue to locate in large urban-core cities, where operations at least appear profitable, even though the resulting net social product (taking diseconomies into account) is less than that which would be generated by an alternative location. Still, the increasing ten dency of business to locate in the suburbs suggests a recognition of the diseconomies attendant to operating in the central cities. In any event, the proper measurement of efficiency would require an accounting and pricing system that takes all v alu es in to account, including the so-called intangibles and amenities. Such a system does not yet exist, and even if it did, the problem of calculating the costs of switching from one urban form to another — from existing cities to projected new towns — would still be formidable. Social balance Another problem with achieving com patibility among the various new-town ob jectives centers on the question of social MONTHLY REVIEW July 1972 Mew tow ns mciy house only one-fifth of nation's 100 million new residents M illio n s Projected N e w T ow ns Other Population Centers Central Cities 100 O utside Central Cities Non metropolitan A reas 0 1970 2000 balance, that is, the accommodation of a representative mix of socio-ethnic and in come groups within the community. As noted previously, the provision of equal job op portunities and adequate low-and middleincome housing rank high among the eligibil ity criteria g o v ern in g F e d e ra l financial assistance to new-town developers. Reston and Columbia have achieved some success in achieving racial mix, as minorities (in this case Blacks) account for about 7 and 15 percent, respectively, of their resident populations. As for the income mix, the available evidence indicates that median in comes are quite high (about $20,000), and that the income of minority residents is well above the median of minority groups gen erally, partly because these residents include a significant number of well-paid profes sionals. In fact, new-town homes for the most part have been considered luxury items, well beyond the reach of the typical low- or moderate-income worker. By definition, new towns lack an inven tory of the older, cheaper units which now house most of the urban poor. In the absence of very substantial subsidies exceeding what is now available through FHA 235-236 pro grams, new-town developers probably could not produce substantial amounts of new housing for that income category. In short, attempting to house low-income groups in new towns may prove to be a relatively costly and inefficient way of providing them with decent housing — more costly at least than refurbishing older units in the inner cities. However, if the problem of financing lowincome housing were to be solved, new towns could offer a potentially significant increase in job opportunities to minorities, whose problems have been compounded by the tendency of employers to leave the cen tral cities for the suburbs. Beyond that, the emphasis of new-town planners on aesthetics and the environment is essentially a matter of interest only to the relatively affluent. (For this reason, measures of efficiency as applied to alternative urban forms may have to take explicit account of differing class biases.) New-town residents concerned with the amenities thus may be unsympathetic to the developer’s efforts to make the community self-contained (and profitable) by the inclusion of an incomeand tax-generating industrial base. Nor have the new towns been altogether successful in instilling a sense of identity and participation among their residents. (“New Town blues,” a phenomenon first dis covered among residents of the British new towns, has been found to affect American new-town dwellers also.) Otherwise, surveys indicate that new-town residents generally 13 FEDERAL RESERVE BANK are satisfied with what their communities offer, even though they are beginning to experience some of the woes that affect the rest of urban America. 14 Other problems On yet other counts, critics question the ability of new towns to meet their stated ob jectives. For one thing, new towns might actually exacerbate environmental problems by contributing to a leap-frogging urban sprawl, since virtually all of the proposed new communities are to be located within the orbit of existing metropolitan centers. As for pollution control, it may be easier (and much less costly) to take pollution away from the people where the problem is the greatest — in the large urban centers — than to take people away from the pollu tion problem. Moreover, questions may arise about the potential of new towns as urban laboratories, simply because of the limit imposed on ex perimentation by the inherent riskiness of new-town development. With adequate pub lic assistance, some potential for experi mentation would still appear possible, includ ing such innovations as pre-fabricated and modular-type housing, but cost factors might limit the private sector’s experimentation for the foreseeable future. Other questions arise concerning the ef fectiveness of trying to control the nation’s population growth — a projected increase of 100 million by the end of the century — by simply creating 10 new cities of 1-million population and 100 new cities of 100,000 population. Critics note that the 20 million people accommodated by th e p ro p o se d new towns would represent only 20 percent of the total population increase over the period — and only 7 percent of the total population — so that existing cities would have to absorb the remaining 80 percent of the projected growth. (It is assumed that the size of the rural population would remain OF SAN FRANCISCO relatively unchanged.) Indeed, if each of the smallest 200 metropolitan areas in the nation were to absorb an additional half-million people, the projected 100 million increase in population could be accommodated without any of the 200 areas exceeding 2.5 million in size — and without the creation of any new towns at all. Critics of the new-town movement con tend that it would be enormously expensive to achieve a truly massive redistribution of population — that is, enough of a redistribu tion to make a real difference in terms of economic, social, environmental and geo graphical balance. The total cost might be considerably less, and the likelihood of suc cess increased, by programs aimed at direct ing growth towards existing cities with pop ulations of from 250,000 to 500,000. Unlike totally new towns, these “growth centers” already have a well developed in frastructure; unlike the major metropolitan areas, they are not overwhelmed (at least not yet) by the vicious circle of urban prob lems. The Presidential Commission on Pop ulation and the A m e ric a n F u tu re (the Rockefeller Commission) consequently has e m b ra ce d recommendations favoring the channeling of population towards medium sized growth centers. A final obstacle — perhaps the major ob stacle — to the new-town movement is the absence of a well-defined national urban policy. According to this line of thought, formulating and carrying out such a policy would require an unprecedented degree of cooperation among the Federal government, the state and local governments, and the private sector. Yet the fragmented nature of the govern mental s tru c tu re and policy-making ap paratus in this country — the pluralistic system which emphasizes decentralized deci sion-making and local autonomy — works against concerted action. Rather, it is more July 1972 MONTHLY conducive to an ad hoc, cautious approach to urban problems, which in itself reflects a widespread lack of agreement as to just what urban problems require what solution, in what order, and in what way. W hat future? What then is the future of the new-town movement? Any solid conclusions are im possible, simply b e c au se of the lim ite d American experience with new towns; thus far, very few have come to fruition, and the empirical basis of any definitive assessment is lacking. In view of the magnitude of the problems, however, private enterprise alone is not likely to play a major role in develop ing new towns with the broad socio-eco n o m ic -e n v iro n m e n ta l c h a ra c te ris tic s envisioned by their creators. Moreover, the various public programs which have been initiated in support of new towns thus far appear to be inadequate to the implementa tion of their stated objectives. Given the pluralistic nature of the deci sion-making apparatus in this country, the success or failure of the new-town move ment may ultimately be determined at the state level. In other words, many of the more serious problems faced by new-town REVIEW developers, including the problems of land acquisition and conformance with local zon ing and building codes in overlapping or contiguous jurisdictions, might best be re solved by state-development agencies such as the NYUDC, with wide powers to over come such local restrictions. Furthermore, state agencies would appear to be in a particularly favorable position to assure that urban growth — including the creation of new towns — is accomplished with an eye to region-wide environmental balance. (This consideration is particularly important in the West, where individual states typically encompass large, geographi cally diversified areas.) In addition, statedevelopment agencies with broad powers and well formulated land-use plans would be eligible (as is already the case) for Federal new-community assistance on preferential terms, and would be able to maintain a rea sonable balance between the demands of a n a tio n w id e population-growth policy and their own regional interests. The success of the new-town movement thus will depend on a host of private and governmental initia tives, and not least of all upon effective action at the statewide level. Nonna Noto and Verle Johnston 15 FEDERAL RESERVE BANK OF SAN FRANCISCO Qyotas @ei Foreign Steel ost major foreign producers of steel agreed this past May to a new threeyear plan restricting their export of steelmill products to the United States. The agree ment, which could result in an 11-percent reduction in imports in 1972 alone, tightens somewhat a quota arrangement which was in effect during the 1969-71 period. M President Nixon hailed the agreement as “a welcome development . . . which will enable domestic steel producers to make their plans with confidence that imports will not be disruptive to the domestic market,” and he added, “it will help preserve the jobs of American steelworkers.” Spokesmen for the domestic steel industry echoed the President’s sentiments, but spokesmen for the consumer movement took a completely different line. Consumers Union sought an injunction against the agreement in a Wash ington Federal court, charging that it con stituted a “per se” violation of the Sherman Act, since it permitted “artificially high price levels” through its limitations on U.S. sup plies of foreign steel. Wholesale prices of steel-mill products jumped 20 percent dur ing the period of the last quota arrangement, or almost twice as fast as the average for all industrial commodities. 16 In letters of intent to the Secretary of State, producer federations in the Common Market countries (acting through the Euro pean Coal and Steel Community), Japan and the United Kingdom agreed to limit their steel imports to the U.S. this year to 14.5 million tons. Japan and the Common Market each would account for 6.5 million tons, and the U. K. for the other 1.5 million tons. (In 1971, their shipments were 6.9, 7.2, and 1.4 million tons, respectively.) Non signatory producing c o u n trie s, such as Canada and Sweden, would be expected to hold their shipments below 1.8 million tons, down from 2.9 million tons last year. Total imports thus could fall to 16.3 million tons in 1972, from last year’s record high of 18.3 million tons. Qu@ta agreem ents act to brake sharp upsurge in imports I9 6 0 1 96 5 1970 1 97 2 1974 July 1972 MONTHLY REVIEW Reduced market share AS1 major producing countries If the “voluntary” agreement holds up, foreign steel will account for a much reduced share of the American market this year. Domestic producers could ship perhaps 96.0 million tons this year — assuming the stan dard forecast of a 10-percent increase over 1971 production levels — with perhaps 93.2 million tons of that total going to domestic buyers. Thus, with 16.3 million tons of im ports, total domestic consumption might reach 109.5 million tons. At that level, im ports would account for 14.8 percent of the U.S. market — down from 17.9 percent last year, but still higher than any other year except 1968. Although the agreement permits increased imports during the remaining years of the three-year pact, total imports by 1974 could still fall 7 percent below the 1971 peak of 18.3 million tons. In 1973, Japanese pro ducers are expected to limit their export in crease to 2.5 percent and European pro ducers (including the U.K.) to 1.0 percent; in 1974, all producers are expected to adhere to the 2.5-percent growth limit. The new agreement thus generally fol lows the pattern set by the 1969-71 agree ment, with sharp reductions in the first year of the pact followed by limitations on growth in the succeeding two years. The old agree ment envisaged a 14-percent overall reduc tion between the pre-pact year (1968) and the third year of the agreement (1971), with a 22-percent cut in the first year followed by 5-percent increases in each of the next two years. Imports of steel-mill products actually conformed quite closely to the quota restric tions during the first year of the old threeyear agreement, falling from a high of 18.0 million tons in 1968 to only 14.0 million tons in 1969 and 13.4 million tons in 1970. This decline reflected in part the general compliance with the quota agreement, but exceed quotas during 1971 M i ll io n s of T o n s 0 2 4 6 8 it also reflected the slowdown in the U.S. economy and the boom in foreign markets, which tended to divert steel to the faster growing markets overseas. In 1971, however, imports jumped sharply above the 15.4 mil lion ton quota to a record high of 18.3 mil lion tons, as steel users in this country built up their inventories as protection against a possible strike. During all three years of the agreement, the p e rfo rm a n c e of individual countries varied with regard to compliance. Japan ex ceeded its quota in both 1969 and 1971, and Common Market countries far exceeded their quota in 1971 after falling considerably below quota in earlier years. Non-signatory producing countries exceeded their implied quotas in all three years, and by a very con siderable margin in 1971. Less specialty steel Last year, foreign producers exceeded their quota limitations most sharply in the high-quality, low-volume categories, such as stainless steel (34 percent over quota), and tool and other alloy steel (59 percent over quota). These categories still represented only 3.3 percent of total steel imports, but the high prices of specialty steels enabled foreign producers to boost their revenues 17 FEDERAL RESERVE BANK from U.S. trade by more than the propor tionate increase in their total volume of ship ments to this country. This increase in the mix of higher-value products, along with the general increase in steel prices, enabled for eign producers to maintain total receipts from U.S. sales almost even between 1968 and 1970, even in the face of a 25-percent reduction in overall volume — and helped bring about a new peak in dollar receipts as tonnage soared last year. OF SAN FRANCISCO in alloy-steel shipments between 1972 and 1974, but for continued cutbacks in stainlesssteel shipments. Some problems may arise in reducing total imports of specialty steels, however. The European producer associations which negotiated the agreement account for only about two-thirds of European specialty-steel shipments to the U.S., but spokesmen for these associations stated that they “will use their best efforts” to induce non-participat ing firms in Common Market countries to abide by the quota limitations. More im portantly, non-signatory nations may have a considerable impact on the market, at least in the stainless-steel category. Canada and Sweden, who a c c o u n te d for almost onefourth of U.S. stainless-steel imports in 1971, have been exceeding last year’s pace so far in 1972, and thus may offset much of the cutback agreed to by other producers. Less steel in the W est 18 Not surprisingly, the new agreement calls for the sharpest reductions in trade to occur in these specialty-steel categories. Between 1971 and 1972, the Common Market (in cluding the U.K.) and Japan are expected to reduce their alloy-steel shipments from 324,000 to 254,000 tons, and their stainlesssteel shipments from 147,000 to 106,000 tons. The agreement calls for some increase The new agreement attempts to curb fur ther foreign penetration into each of the regions of the U.S. — especially the West, which now buys almost one-third of its steel from foreign sources. (The foreign share of the District steel market jumped from 9 to 31 percent between 1961 and 1971, while the import share in the rest of the nation rose from 5 to 17 percent over the decade.) Henceforth, the foreign signatories will at tempt to maintain the same proportionate geographic distribution of shipments as they maintained on average during the 1969-71 period, although some year-to-year fluctua tions are permitted. Japanese producers spe cifically agreed to ship no more than onethird of their total U.S. shipments to the Pacific Coast customs region, in conform ance with the 1969-71 average pattern. The terms of the new quota agreement are somewhat more favorable to the domestic industry than those of the original pact, MONTHLY July 1972 Japan sharply increases its share of Western U.S. market Millions of Tons especially from the standpoint of the over all growth mix of steel products and geo graphical market penetration. Its overall effectiveness could be reduced by the volun tary rather than mandatory nature of the program and by the non-participation of some important producing countries — just as in 1971, when imports were almost 19 percent over quota. Still, the agreement promises to reduce considerably the foreign REVIEW competition to domestic producers; in the first quarter of 1972, even before the pact was signed, steel imports had already de clined to the levels permitted under the agreement, and the downward trend con tinued in April. Nonetheless, the legality of the agreement will remain unsettled until the courts rule upon the validity of the Consumers Union suit. In seeking an injunction, Consumers Union charged that the agreement represent ed an antitrust violation, since it was a “con spiracy” between Administration officials and foreign and domestic steel interests for “unreasonable restraint” of trade. The suit also alleged a violation of the 1962 Trade Agreements Act, because there were no Tariff Commission investigations, p u b lic hearings, and findings of serious injury to domestic industry prior to the agreement. The next move is uncertain. But if con sumer interests were to succeed in keeping open the channels of trade by blocking this arrangement, producer interests might seek redress by persuading Congress to enact mandatory quotas on the steel trade. Yvonne Levy Publication Staff: Karen Rusk, Editorial Assistant; Janis Wilson, Artwork. Single and group subscriptions to the M onthly Review are available on request from the Administrative Service Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco, California 94120 FEDERAL RESERVE BANK OF SAN FRANCISCO Publications Available The China Trade (40 pp. 1972)— An analysis of two centuries’ trade between China and the West. The study describes the development of trade under Western auspices during the 19th and early 20th centuries, and then describes the completely different trading environment existing today. After analyzing the structure of China’s current imports and exports, the study concludes with estimates of the future magnitude of the China trade. Silver: End of an Era (32 pp. 1972)— A revised version of an earlier study of the politics and economics of the silver industry. The study describes a century of silver legislation (leading up to the recent demonetization), the development of the Western mining industry, world coinage and industrial demand, and the sharp price fluctuations of the past decade. Nation-Spanning Credit Cards (12 pp. 1972)— An analysis of the rapid growth of bank credit cards, with emphasis on the nationwide coverage recently obtained by two major card plans. The study describes the advantages to cardholders and merchants from widespread credit-card usage, technological developments enhancing the spread of a general electronic-payments system, and the increasing profitability of card plans with the growing maturity of the industry. W all Street: Before the Fall (36 pp. 1970)—An analysis of basic stockmarket de velopments of the past 15 years. The booklet describes the supply and demand factors underlying general price trends, and analyzes the industry’s operational problems and the expanded role of institutional buying in recent years. Calibrating the Building Trades (20 pp. 1971)— An analysis of the unique features of the construction industry and their effect on construction wage trends. The study describes the Administration’s development of an “incomes policy” tailored to that specific industry. Aluminum: Past and Future (64 pp. 1971)— An analysis of the long-term growth of the aluminum industry, with its eight-fold expansion in consumption over the past quarter-century. The study describes the locational factors responsible for the national and international spread of the industry, and analyzes the reasons for recent fears over the industry’s sharp expansion of capacity. Copper: Red Metal in Flux (56 pp. 1968)— An historical study of the copper in dustry, with emphasis on the growth of Western producers. The report describes copper’s response to the competitive inroads of other materials in traditional copper using industries. Law of the River (16 pp. 1968)— An analysis of present and future sources of water for the Pacific Southwest. The report describes how Southern California and Arizona are looking beyond the Colorado River to meet their 21st-century needs for water. Individual copies of each publication are available on request, and bulk shipments are also available free to schools and nonprofit institutions. Write to the Administra tive Service Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco, California 94120.
@FedFRASER