The Changing Politics of Urban Mega-Projects

From the earliest days of the Republic, civic boosters have prodded American governments to develop large-scale physical facilities—mega-projects, we label them—ranging from canals and railroads in the nineteenth century to rail transit systems and convention centers today. Until the mid-twentieth century, such projects tended to involve modest public expenditures by contemporary standards and they rarely caused significant disruption of the existing urban fabric.

This pattern altered abruptly in the 1950s and early 1960s. Central city economies had, with rare exceptions, stagnated through the Great Depression and World War II, and they continued to do so in the early postwar years. Local business and political leaders concluded that if central cities—particularly those developed prior to the auto age—were ever to thrive again, they would require major surgery. Specifically, they needed to clear slums to provide large downtown sites for redeveloped office districts; to facilitate high-speed automotive movement between suburban and central city locations; and to provide larger airfields with attractive terminals for the nascent commercial aviation industry.

Recognizing that they could not finance these expensive projects with locally generated funds, urban leaders campaigned aggressively for federal assistance, and they were successful in obtaining considerable amounts of funding. We attribute their success mainly to the following factors: (1) public confidence in government was unusually high in the postwar period; (2) business leaders generally accepted the need for government activism to sustain prosperity; and (3) although cities lacked the political clout to secure expensive programs on their own, they were able to participate in much broader coalitions—most notably, those focused on housing (which expanded to include urban renewal) and highways. Urban aviation advocates were less successful, but as aviation traffic boomed they were able to fund new airports and expand old ones by relying primarily on revenues from landing fees and terminal leases.

During the late 1950s and the 1960s these efforts combined to produce an unprecedented wave of urban public investment. While often successful on their own terms, these projects tended to be highly disruptive as well, destroying in particular vast amounts of low-income housing and urban parkland. Project advocates maintained that the public should accept such impacts to advance the greater good. Robert Moses, New York’s famed master builder, never tired of citing a French proverb: “You can’t make an omelet without breaking eggs” (Caro 1974).

During the late 1960s and early 1970s, however, neighborhood activists allied with those involved in the emerging environmental movement against the full panoply of mega-project programs that had come into being during the 1950s. They succeeded not just in blocking large numbers of planned expressways, renewal schemes and airport projects, but also in securing the adoption of numerous statutes, regulations and judicial doctrines, thus strengthening the hands of critics in urban development controversies. For a time it seemed to most observers that the era of mega-project investment in cities was over.

“Do No Harm” Planning

The forces committed to mega-projects have proven highly resilient and adaptive, however. While the character of such investment has changed dramatically since the 1970s, its volume has remained high. Nevertheless, mega-project advocates have had to work within new constraints; they have had to learn the art of making omelets without leaving a residue of broken eggs. We label this art, as exercised in the domain of urban land use, “do no harm” planning. Its essential components are the selection, siting and design of projects to minimize disruptive side effects, and the aggressive mitigation of any harmful impacts that cannot be avoided entirely. Most obviously, governments have ceased clearing slums and building expressways through developed neighborhoods, and only one major new passenger airport—in Denver—has been constructed since the early 1970s.

Public investment in facilities such as rail transit systems, festival retail markets, sports stadiums and arenas, and convention centers has surged. Within the transportation sector, moreover, investment priorities have shifted toward the reconstruction of existing highways, new construction on suburban fringes and airport terminals rather than runway improvements. The great advantage of such projects is that they are relatively easy to site either at some distance from existing development or in older commercial districts that have few preservationist defenders.

Where cities and states have gone forward with major highway and airport projects, they have taken extraordinary steps to minimize social and environmental impacts. The new Denver airport, for example, is on a previously rural 53-square-mile site 25 miles east of downtown. Its location and scale were determined primarily by two considerations: land assembly without the disruption of existing residential enclaves; and future airport operation without significant noise impacts overflowing the airport boundary. Boston’s $14.6 billion Central Artery/Tunnel project, known colloquially as “The Big Dig,” appears very different, in that it is located in the heart of downtown, but it is virtually identical in its do no harm planning orientation. It is almost entirely underground as it passes close to built-up areas (replacing a previous elevated roadway); it has been threaded into the urban fabric without the taking of a single home; and it will add significantly to the city's parkland.

Common Themes

In addition to do no harm planning, our review of mega-projects built over the past two decades identified the following themes as particularly salient.

Business Support

While insufficient by itself, strong business support has generally been an indispensable condition for mega-project development. Within the business community, leadership has almost invariably come from enterprises with deep local roots, particularly in real estate ownership, development and finance. The strongest supporters of Denver’s new airport, for example, were those who owned property with commercial development potential near the new site; downtown businesses concerned that the city’s existing airport was too small to allow for the region’s continued development; and the banks and financial service firms that had lent money to many of the city’s property owners and developers. Similarly, the most active and effective support group for Boston’s Big Dig has been the Artery Business Committee, a coalition of those who own major buildings adjacent to the artery’s corridor and several major employers with historic roots in downtown Boston.

Public Entrepreneurs

In addition to well-mobilized constituencies, aggressive, deft government officials have been indispensable to the success of recent mega-project proposals. Indeed, it was frequently they who originated project ideas and first sparked the formation of supportive coalitions. Even when others initiated, they commonly took the lead in crafting strategies, tactics and plans; in lobbying for state and federal aid; in securing other types of needed legislation and regulatory approvals; and in dealing with project critics.

Though business groups initiated some projects, they seemed more frequently to “invest” in proposals originated by public entrepreneurs. The business constituents were by no means easy marks, of course. Like venture capitalists in the private sector, they considered a great many ideas brought to them by public entrepreneurs (and others), but invested only in those few that looked particularly good for their enterprises, were to be carried out mainly or entirely at public expense, and had a reasonable chance of securing the myriad approvals required.

Illustratively, Boston’s Big Dig was conceived by Fred Salvucci, a transportation engineer who had become active in battles against planned highway and airport projects during the 1960s and then served as transportation secretary for twelve years under Governor Michael Dukakis. During the first Dukakis administration (1975–1979) the main constituencies for a new harbor tunnel (business) and for depressing the central artery (neighborhood and environmental groups) were at loggerheads. While temporarily out of office from 1979 to 1983, however, Salvucci concluded that the politically feasible strategy might be to marry these projects, while also relocating the tunnel to an alignment far from a neighborhood that it had historically threatened. This strategy in fact resolved the local controversy, and prepared the way for a successful campaign for massive federal aid, led again by Salvucci with critical business support.

Denver Mayor Federico Peña broke a similar type of logjam that had persisted for years over whether to expand Denver’s existing Stapleton Airport or build a new facility on a large site outside the city’s borders. Concluding that the obstacles, both political and environmental, to expanding Stapleton were insuperable, but that city ownership and operation of any new airport remained a critical objective, he negotiated successfully with adjacent Adams County for a massive land annexation. To achieve this objective, he accepted conditions protecting county residents from significant airport noise and guaranteeing Adams County most of the tax benefits that would flow from economic development around the new airport. With local agreements in hand he, like Salvucci, then led a successful campaign for special federal assistance.

Mitigation

Do no harm plans avoid substantial neighborhood and environmental disruption but it is impossible to build a mega-project with no negative side effects. The commitment of do no harm planning is to ameliorate such impacts as much as possible, and to offset them with compensatory benefits when full direct mitigation cannot be achieved. The boundary between mitigating harm and providing net benefits to protesting groups is often indistinct, however, so the norm of mitigation provides leverage as well for skilled activists whose demands are at times tangential to the mega-projects whose budgets they seek to tap. Mega-project champions in turn reflected on the fate of such projects as New York City’s proposed Westway, which failed because of what seemed at first a minor legal challenge. They were deathly afraid of litigation and were frequently willing to make very expensive concessions in return for agreements by critics not to sue.

During permitting for the Big Dig, for example, Boston’s Conservation Law Foundation (CLF), a group whose signature strategy was litigation for environmental purposes, threatened to sue unless the state committed to accompany the highway project with a multi-billion dollar set of rail transit investments, mainly for expansion. CLF’s rationale was that the transit projects would prevent the new road from filling up with traffic, which in turn would generate more air pollution. Modeling done for the project (as well as data from other regions) showed that the Big Dig would not in fact have significant air pollution effects, and that investing in rail transit extensions would be a particularly inefficient way to offset pollution effects if they did occur. Nonetheless, both Democratic and Republican state administrations acquiesced to CLF’s demands because they did not want to risk litigation, which at the very least threatened project delays and might also have imperiled the breadth of local consensus in support of the Big Dig.

Bottom-up Federalism

A naïve observer of American politics might assume that the federal government distributes grants to achieve national goals. In fact, however, the grantor-grantee relationship is usually much more complicated than that. Recipient jurisdictions are typically active participants in the coalitions that bring new programs into being and provide them with critical support each budget season. The programs of aid for mega-project investment that we examined were all distinguished more by their openness to local initiative than their sharp definition of national purpose. If grantee jurisdictions had a great deal of influence collectively on program structure, moreover, they had even more when it came to projects, and they were able to exercise it individually.

Every project we studied was initiated by subnational officials and interest groups, and it was they who took the lead at every stage in the decision process. While limited in their discretion by federal program rules, they were alert as well to opportunities for securing waivers, statutory amendments and add-on funds, with the assistance of their congressional delegations. Stated another way, when federal aims are diffuse and weakly defended, principal-agent theory (as applied to the intergovernmental system) needs to be read bottom-up rather than top-down.

High and Rising Costs

Do no harm designs and related mitigation agreements have tended to produce projects that are vastly more expensive than their historic predecessors. According to Brian Taylor (1995), the average cost per centerline mile of urban freeways rose by more than 600 percent in real terms from the 1960s to the 1980s, and costs were even more extreme in some of the mega-projects we examined. Whereas Taylor found that urban freeways cost on average about $54 million per centerline mile (in 2002 dollars) in the 1980s, for example, the Big Dig cost $1.9 billion per centerline mile. Judith Grant Long (2002) reports in a similar vein that the average cost of new stadiums and arenas more than quadrupled in real terms from the 1950s to the 1990s, and we have calculated that light rail development costs increased by nearly two-fifths from the 1980s to the 1990s.

Both older and more recent projects have been marked by a consistent pattern of substantial cost increases between authorization and completion. The projected cost of Boston’s Big Dig, for example, has roughly tripled in real terms since its approval by Congress as an interstate highway project in 1987. The cost of Denver International Airport more than doubled from the late 1980s, when it received voter approval and its federal funding commitments, to its completion six years later.

While a full study of this issue was beyond the scope of our work, we judge that the consistent pattern of underestimation has two primary causes. First, project advocates have very strong incentives to estimate optimistically as they seek political commitments of support. Second, mega-projects are often so complex—both technically and in terms of the mitigation agreements that will often prove necessary to keep them on track—that early cost estimates are typically little more than guesses within very broad ranges.

Locally Painless Project Funding

The hallmark of successful mega-project financing is that projects should appear costless, or nearly so, to the great majority of local voters. The easiest way to achieve this result is to rely on funding from higher-level governments. Where such aid is unavailable or insufficient, the challenge is to identify other sources of revenue to which local voters are generally insensitive—which means, above all, avoiding local property and income taxes and spreading the burden beyond host city residents.

This challenge became increasingly salient after 1970 with rising antitax sentiment, the end of federal renewal aid, and the surge in capital spending for such facilities as stadiums, arenas and convention centers, for which federal aid was only rarely available. In the growing domain of mass transit, moreover, federal matching ratios have tended to decline since 1980.

The revenue strategies adopted to deal with these challenges have been varied and ingenious. New terminals and runways at major airports have been funded largely by increased landing fees, lease payments, and (since the early 1990s) ticket surcharges authorized by the federal government but imposed locally. Stadiums, arenas and convention centers are commonly funded by taxes that fall mainly on nonresidents, such as taxes on hotel rooms, car rentals and restaurant bills. Where broad-based taxes have been unavoidable, the preferred method has been incremental add-ons to sales taxes, which typically require voter approval. Voters have often said no, but sales tax increases provide large amounts of revenue when they are adopted—and when they are not, project advocates routinely come back with revised plans. In Los Angeles and Seattle, for example, transit advocates responded to referendum defeats by scaling back their rail plans and allocating some of the projected revenue to bus service and local road improvements.

Looking to the Future

Almost two decades ago, when New York City’s ambitious Westway project died even though its backers had helped pioneer the do no harm planning and design paradigm, then-Senator Daniel Patrick Moynihan wondered whether it had become so difficult to build public projects that “Central Park could not conceivably be built today” (Finder 1985). Recent history suggests, however, that the mega-project impulse remains strong. The pertinent question is not whether the U.S. political system can still generate mega-projects but whether the projects that go forward are typically worth their costs to taxpayers.

In general, economists are skeptical about the cost-effectiveness of the most prominent mega-projects, from the Big Dig to the scores of rail transit systems, professional sports facilities and convention centers, built over the past 25 years. Project advocates invariably retort that the economists miss intangible project benefits such as fostering community pride and (in the case of transit, particularly) strengthening the likelihood of smart growth practices in new development. The national coalitions in support of highway and airport improvements, which economists tend to rate more favorably than other types of projects, have argued vociferously that current environmental rules and opportunities for critics to litigate are too onerous and should be relaxed.

There is no easy resolution of these issues because they involve tradeoffs between important, deeply held values. However, our review of a half-century of public works projects in urban areas has left us with three clear impressions. First, states and localities should be required to bear half or more of the cost of projects they undertake, because great windfalls of earmarked money from higher levels of government tend to overwhelm serious local deliberation. Second, strong environmental regulation helps ensure that local pro-growth coalitions do not leave fouled environments or devastated neighborhoods in their wake. Finally, while referenda are in general a flawed instrument of policy making, the evidence seems to suggest that the requirement of voter approval for major local projects tends to have a salutary effect on the bargaining between business groups that stand to benefit financially from the proposed investments and the more general interests of local taxpayers and residents.

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Alan Altshuler and David Luberoff are the coauthors of Mega-Projects: The Changing Politics of Urban Public Investment. Altshuler is the Stanton Professor of Urban Policy at the Kennedy School of Government and the Graduate School of Design (GSD) at Harvard University, and director of the Kennedy School’s Taubman Center for State and Local Government. Luberoff is the Taubman Center’s associate director and an adjunct lecturer at GSD.

References

Caro, Robert A. 1974. The power broker: Robert Moses and the fall of New York. New York: Alfred A. Knopf.

Finder, Alan. 1985. Westway: A road that was paved with mixed intentions, losing confidence and opportunities. New York Times, September 22, sec. 4, 6.

Long, Judith Grant. 2002. Full count: The real cost of pubic funding for major league sports facilities and why some cities pay more to play. Ph.D. dissertation, Harvard University.

Taylor, Brian. 1995. Public perceptions, fiscal realities, and freeway planning: The California case. Journal of the American Planning Association 61 (1): 43–56.

Development, Infrastructure, Land Use, Planning, Public Finance, Taxation, Transportation, Urban, Urban Development
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