Marginal Utility

by Tom Bozzo

Behind last week's Ford and GM debt downgrades, still shaking the financial markets, were continuing signs of the gas price driven SUV sales apocalypse. In GM's April sales figures, large SUVs led a 17% year-over-year decline in truck sales. Versus April, 2004, sales of Cadillac trucks were off 20% (led by the Escalade); Chevy Suburban, down 32%; Chevy Tahoe, down 36%; GMC Yukon, down 39%; GMC Yukon XL, down 34%; Hummers, down 28%; Pontiac Aztek, down 78% (*).

It's perhaps instructive to revisit what may be GM Vice Chairman Robert Lutz's Famous Last Words:

For "the median income of, say, a Suburban or a GMC Denali buyer, probably the best demographics of any vehicle we have, or a Cadillac Escalade, you're looking at people with a household income of $150,000 to $200,000," he said. "Do they care whether their gasoline bill goes from $20 a week to $40 a week? The answer is no."

If the gas bill increase is believed to be transient, then Lutz is probably right that the increase doesn't matter. If, on the other hand, SUV buyers expect the gas bill to stay $40/week in perpetuity, if not get worse — not a totally unfounded concern — the increase in operating cost over the life of the vehicle becomes nontrivial. Since relatively few large SUV drivers have any real need for a large SUV, it's just economics 101 that some will respond to the increase in the effective price of the large SUV by substituting a smaller SUV or even a good old car. I assume the laws of economics have not been repealed such that the shadow value of SUV "fashionability" is not finite.

There were some other pricing and product cycle factors in play for the month, including an effort to restrain sales incentives, so it will be interesting to see how this continues to play out.

Right around now, you may be wondering, what does this have to do with New Urbanism?

To borrow liberally from a must-read post (particularly for Syracuse readers, who may be amused by the take on the DestiNY USA mall boondoggle; link via James Wolcott) at Jim Kunstler's Clusterf*ck (**) Nation, planning on an unending SUV gravy train is fine under the assumption that gasoline will stay "supernaturally cheap" forever. But faith in the unsustainable is not a plan.

Meanwhile, in Madison Blogistan (the right side of the Madison blogiverse, like some blocks in Maple Bluff; apologies to Max), Bryan Smith and the anonymous Random10 are up in arms in the wake of a lengthy State Journal article on the city's use of tax increment financing, or TIF. (Random10 does note usefully that there is a risk of the unintended consequence of pushing some development to exurban open spaces.) A big part of their beef is the use of TIF financing to foster dense infill developments in central neighborhoods, or as Bryan puts it,

(ab)use of TIF money to spread [Mayor Dave Cieslewicz's] vision of trolleys and neighborhood grocery stores, rather than for developing poor areas.

This does not seem to be a particularly fair summary. As the article notes, Madison devotes a smaller share of tax revenue to TIF districts than the state average. A TIF district encompasses the Allied Drive neighborhood, perhaps the city's poorest and most crime-ridden, and garners proceeds from the Nakoma Plaza redevelopment; the city also delivered a large subsidy to developer Gary Gorman for an affordable development in the district on the east side of Verona Road. A district in the East Washington Avenue corridor would encompass some of the city's most conspicuous post-industrial blight. There's also a risk of a hindsight obviousness bias for the success of the districts encompassing Capitol Square condo-land.

The "trolleys and neighborhood grocery stores" part of the critique, though, seems to be just that the city has planning policies that foster urban, rather than suburban, development, and (make sure you are sitting down) is directing public funds to implement those policy priorities. Going back to Kunstler, if it turns out that increases in the relative price of commuting reduce the viability of suburban sprawl, the city will appear to be visionary.

Bryan may wish to make the point that he simply objects to the public sector interference in the "market." That is fair enough, but as a matter of religion it's no more valid a position than Mayor Dave's. I will also believe more strongly in his good faith if he would post that if I determine that the market would support a convenience store next door to his house, he will not only support the conditional use before the various city planning agencies, but also actively solicit his other neighbors' support, too. Bonus points if he survives to tell the tale.

I think, though, that most of us in Madison are happy that not all of Madison resembles Houston.

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(*) Not a large SUV as such, just a monstrosity.

(**) Term defined here at UrbanDictionary.com, apparently of military origin; or as noted in comments here: "any operation with too many leaders leading too many people at cross purposes and laboring under the illusion that there is a unified purpose and a brilliant plan."