The Platform

Maarten van den Heuvel

Cities can no longer rely on the cash cow of downtown office drones.

Early predictions from 2020 that cities would lose major tax revenues as more people opted to work from home were not taken seriously. In 2020, I predicted sales tax revenues would shrink and cities would never get back to pre-pandemic levels. Those predictions turned out to be right on the money. In New York City alone, try over $12 billion a year in losses.

New York City is not the only major city that has seen real drops in sales tax revenues. Chicago and San Francisco have seen their sales tax revenues drop along with vacancy rates for commercial space soaring into the double digits. San Francisco recently went from a 4% vacancy rate to a 25% vacancy rate in the commercial leasing space.

Last year I wrote: “Any city thinking it will be going back to the same pre-COVID occupancy rates in their commercial office buildings as well as collecting the same tax revenue streams are very misinformed. This is critical as we enter the new post-COVID era of commercial leasing which reflects the reverse of musical chairs. As more companies shed unneeded commercial office space because more of their workforce is working-from-home, the availability of empty office space is going to skyrocket in many, if not all, major downtowns and suburban office parks.”

What does it take to become a smart city in this new post-pandemic era where sales tax revenues that were taken for granted, have been hit hard? Let’s look at Chicago as an example and see where critical infrastructure decisions need to be made before transforming a traditional city into a 21st-century smart city.

First, we need to understand the new post-pandemic changing dynamics of mass transportation. This is important to all cities, not just smart ones. Equipment, system technology, and city operations become obsolete and they need to be replaced, not increased. Agencies and organizations overseeing these operations need to be transformed as well.

At the height of the pandemic, ridership on METRA (Chicago’s commuter rail system), dropped 90%. As more work-from-home jobs become permanent, requirements for mass transportation are going to shrink. More people may eventually go back to work, but many will stay home permanently.

Pre-pandemic ridership levels on METRA will never be attained. Reassessing what is needed to service commuters and what should be eliminated needs to be performed. In other words, the concept of “cutting spending” needs to become a real action for managing mass transit.

Second, Chicago should consolidate the four transportation authorities. We don’t need the RTA, CTA, Pace, and METRA boards with overlapping transportation authority. Instead of fighting between fiefdoms for a piece of the federal money, create one regional oversight board and free up a lot of annual operating budgets to be spent on maintenance and new development. Instead of four boards with four chairmen, four presidents, and four treasurers, consolidate them into one regional authority and eliminate redundant staff and admin costs. Someone said it can’t be done. Why not?

Consolidation needs to become part of the government vocabulary across the country, especially in Illinois, New York, California, and all the other states where bureaucracies have gotten out of hand. Just like obsolete equipment needs to be updated or replaced, the organizational structures managing these operations need to be updated and streamlined as well.

Third, look at the benefits of re-evaluating bus routes. A bus is not a “mass transit” vehicle if there are only three passengers and one is the driver. Many suburban PACE buses driving around my area, even in rush hour, reflect this lack of use. The new management approach should be to cut out the empty bus routes and if there still is a small need, get that one person an Uber.

There are tremendous cost-savings with that decision: The cost of the bus, its maintenance, its fuel, a driver’s salary, benefits, and pension, the mechanic that maintains the bus, and insurance on the bus – all these expenses are lowered. If there are routes which have a consistently high volume of riders, they remain unchanged. If there is low ridership or no ridership, all those assets should be re-assigned or retired. The same applies to “every train must stop here” stops, where ridership has diminished or fallen off completely. Efficiency should be a continuous, pragmatic objective, not an annual bureaucratic hoped-for.

20th-century solutions do not solve 21st-century challenges. Times change. Demands change. Technologies change. Elements of infrastructure change. Organizational structures managing those technologies need to change as well and not become permanent, overlapping patronage fiefdoms.

Fourth, smart cities are not built of dumb buildings. Buildings need to have intelligent infrastructure to support mission-critical applications: Redundant power and broadband connectivity networks coming in on diverse routing. Commercial office space requires this type of resiliency. If the building cannot offer redundant connections to power and broadband connectivity networks, it will become less desirable to those companies looking for commercial office space and it will remain vacant.

With more companies utilizing people working from home, the need for commercial office space is diminishing and a tsunami of vacant commercial office space is forming. Think of the reverse of musical chairs. More space will become available and less demand for it will make those buildings which do not offer the best mix of intelligent amenities, like redundant power and broadband connectivity, obsolete.

Fifth, money saved from not perpetuating obsolete solutions can be spent on new initiatives like drones carrying people to airports from downtown rooftop “drone ports” and avoiding traditional roads and rail lines. People are transported from downtown to the airport much faster than on a train with multiple stops or in a taxi or Uber. Again, a 21st-century solution, not an obsolete solution that gets more funding.

Everyone needs to get on the same page before real progress and improvements can be made to attain a smart city status. Best practices are not found in bureaucracies.

James Carlini is a strategist for mission critical networks, technology, and intelligent infrastructure. Since 1986, he has been president of Carlini and Associates. Besides being an author, keynote speaker, and strategic consultant on large mission critical networks including the planning and design for the Chicago 911 center, the Chicago Mercantile Exchange trading floor networks, and the international network for GLOBEX, he has served as an adjunct faculty member at Northwestern University.