New Jersey – potentially the best state ?>

New Jersey – potentially the best state

New Jersey has so much potential … if we make the right choices.

With the exception perhaps of a strip five miles on either side of the New Jersey Turnpike, New Jersey is one of the most beautiful states in the USA.  It is strategically located in the middle of the BosNyWash corridor (Boston-New York-Washington).  New Jersey is closer to Manhattan than the rest of the state of New York.  If you had to choose a location for a successful state, you couldn’t do better than New Jersey.

New Jersey gets 46 inches of rain per year, 50% more than the US average.  We don’t pump our own gas.  What could be better?  Perhaps a state with less taxes and more jobs.  We face a gubernatorial election in November 2017.  It’s time to take a step back and consider what we want for New Jersey over the next twenty or fifty years.

Tradition of Success

New Jersey has a history of success.  The state led the country in manufacturing, leading to the capital’s tagline, “Trenton Makes, America Takes.”  New Jersey was home to the administration, manufacturing, research, and development for the Bell System.  From the turn of the twentieth century and the establishment of Merck in Rahway, New Jersey was the center of the world’s pharmaceutical industry.

Many other industries developed and flourished as a result of being close to the New York seaport and the publishing and fashion center that is New York City.  New Jersey prides itself on being Embroidery Capital of the World.  The state got its start in refining and chemicals with the establishment of the Standard Oil Bayway Refinery in 1908.  New Jersey companies got an astounding nine percent of allied production contracts during world war two.

Times change.  With population growth, New Jersey was no longer the right site for heavy industry and chemistry.  Some businesses simply outlived their usefulness.  The textile and garment industry that had been so strong in New York and New Jersey migrated, first to the South, where labor rates were cheaper, then offshore.

More tragically for the state, were the industries lost as a result of government regulation and failure to adapt.  The monopoly that was the Bell System employed 24,000 workers in its Kearny Western Electric plant alone.  The 1983 breakup of the Bell System was a turning point for New Jersey’s dominance of telecommunications.  Twenty years later, though, the industry had consolidated again, with the two remaining players AT&T and Verizon both based in New Jersey.  Alas, both decided to relocate, one to Georgia and one to Texas.  The brain-trust of the Bell System, Bell Labs, was sold to Alcatel of France.  With that, the last of a hundred years of years of dominance of the telecommunications industry was over.

New Jersey is not alone in its evolution.  New England, supplier of shoes to the country saw its industry move away.  In 1920, the US led the world in steel production.  Pittsburgh, Youngstown, and Birmingham all saw steel production move offshore.  Similarly, Detroit and Flint have seen changes as the US car industry lost its world domination.  But most have survived.  Boston, leveraging its enormous academic base, is the home for startups and venture capital firms.  It competes with the San Francisco Bay area.  Pittsburgh survived, even without the smoke of a dozen steel mills.

A realistic – some may pessimistic – view of the state will describe an arc with the best years in the past.  The Port of New York, the largest in the nation in 1985 is number three today.  Telecommunications left.  Pharma was hit hard.  When those industries were strong, we built systems based on the implicit expectation that things would remain strong.  The costs remained while the revenue sources left.

An optimistic view of the state focuses on the state’s natural advantages – its proximity to the Atlantic, New York, Boston, and Washington.  The state has the best communications network in the country, including the highest coverage of high speed internet.  The population has ranks sixth in the US for PhDs per 1000 population.  These advantages are not permanent, though.

A pragmatic view of the state’s advantages needs to include a realistic assessment of its disadvantages.  Rosy descriptions in state plans, like the state Strategic Plan need to be assessed critically.  While New Jerseyans are well educated, they were not trained here.  New Jersey is sadly lacking in higher education.  We have one top ranked university, Princeton.  Our other big universities, Rutgers and NJIT are respected, but not lauded.

Our industrial past has left us with areas of high population density and used land.  Camden, Newark, Paterson, and Trenton have developed infrastructure, but the cost of housing and commercial development is higher than the same development on farmland.

An expensive legacy

New Jersey is an expensive state to run.  As a result it is an expensive state in which to live.  This stems in part from a system of governance that invests great power in the township, of which the state has 565.  The county, of which the state has 22, is a relatively weak entity.  Boroughs and towns assess and collect taxes, sponsor police and fire departments, and are responsible for public works.  The result is 565 police chiefs and a higher number of retirees.

One approach to reducing New Jersey’s costs would be to consolidate power and expense of the township to the county level.  This would be a long term effort and not without cries of loss of sovereignty.  The costs would be immediate and the benefits long-term.

New Jersey is a state of entrenched interests, powerful incentives against revolutionary change.  One may interpret entrenched interest as synonymous with corruption, but the pragmatist accepts their existence and seeks to make it generally less attractive, rather than complaining with moral outrage.

New Jerseyans need to take a long term view of where we’d like to be in fifty years.  We probably don’t imagine New Jersey a center of industrial activity.  It’s unrealistic to expect New Jersey to be a hot tourist destination.  That doesn’t mean that we abandon effort to keep the Jersey shore attractive, or that we don’t support the remaining manufacturing concerns located here.  It means that we realistically assess our advantages to industries that we’d like to attract and retain.

In many ways, the telco and pharma industries were ideal.  They both are relatively clean, high margin, and employ people at high salaries.  The trick is to figure out what will be the growth industry of the twenty-first century and the twenty-second after that.  As Sears Roebuck of Chicago passed the torch of the leading retailer to Walmart of Arkansas and thence to Amazon of Seattle, New Jersey needs to attract the next growth industry.  Financial services is a clean and profitable industry, but there is no indication that it benefits from being geographically centralized.

Dependence on New York and Philadelphia

We need to face squarely our interdependence with New York City, and to a lesser extent, Philadelphia.  We serve as residence for many Manhattan workers.  Jersey City serves as an extension of Manhattan office space.  We compete with Brooklyn.  Rather than seeing New York as a rival, we need instead to figure out how we can cooperate for common success.

Rail as a long term investment

A long term view requires long term decisions.  Take for example our need to provide for commutation to New York.  We don’t need to support the personal automobile as a commutation tool.  There hasn’t been a new vehicle crossing to New York built since 1962.  Realistically, there isn’t room in Manhattan for any more cars anyway.  The choice for New Jersey commuters is bus or rail.  Expansion of bus service has been an effective tactic over the last fifty years.  It could be expanded rapidly, with relatively low capital investment.  As a long term investment, it is not ideal.  Buses are more fuel efficient than cars, but are far behind trains.  Fuel is cheap today, but when oil goes to $1000 a barrel, even buses will feel the pinch.  Long term, the choice is clear.  If we are to put New Jersey residents into New York quickly, cheaply and safely, the course is rail.  Until we do so, we need to maintain rail rights-of-way.

Let’s use rail transport as an example of a long term initiative.  We can agree, I think, in general terms that rail is a good thing.  Short term, however, NJ Transit spends four dollars for every dollar collected at the fare box.  The only way the system can exist is with federal subsidy.  This is an investment in the future, an insurance policy against the day that the bus is no longer a viable option.  How much can we afford to spend on this insurance?

A strategic plan requires abandoning all of the current assumptions.  Rail currently carries 106,000 commuters each day to New York.  For rail to be attractive, it needs to be as quick as or quicker than the highway, as cheap or cheaper, and as frequent and convenient.  All of these characteristics require investment in infrastructure.  It means improvement of the tracks to support higher speeds.  It means more parking spaces.  It means changing bus routes to make more interchanges between bus and rail.

Not in 2016 or 2020, but sometime soon, we need to anticipate driverless trains.  There is no reason a rail line needs to be staffed according to a 1920’s model.  In an age of automation, there is no reason a train needs either an engineer or a conductor.  Paper tickets and seat checks are the relics of a bygone age.  Nor can this author understand why NJ Transit needs its own police force of 270.

A clean-sheet review of New Jersey’s public transport needs would show two distinct needs: radial service from New York and Newark to the suburbs, and rings.  The state has begun a network of light rail to provide ring transport, nevertheless buses provide the preponderance of the service.  In any cases, bus and rail is duplicative.  People choose where they live work and shop based on existing routes, so we cannot change routes willy-nilly, but new services need to be based on likely and desirable land use plans.

The problem of divided authority

The overall public transport network is duplicative and not coordinated.  Why?  It appears that this hodgepodge is the result of both state and federal law.  New Jersey is served by four different commuter rail systems: NJ Transit rail, Amtrak, NJ Transit light rail, PATH, and Newark Airport monorail.  The systems interconnect badly, forcing a passenger travelling from midtown Manhattan to ride four systems, changing three times, paying three fares: MTA, PATH, NJ Transit, and AirTrain.  The systems differ technically and by labor law.  Historically, they have reported to different agencies.  Those agencies, based on their charters, have conflicting goals, and therefore limited reason to cooperate.  The employees of NJ Transit rail are employees of the state and are covered by federal rail labor law.  The NJ Transit light rail system falls under the direction of NJ Transit’s bus division, which contracts its operation to private entities.  The airport monorail is technically incompatible with any other rail system – a bad thing – and unmanned – a good thing — a logical and forward-thinking approach.

Divided authority is extraordinarily expensive.  The rider from midtown Manhattan to Newark Airport would see MTA police, NJ Transit police for one stop, and Port Authority police on the PATH and the monorail.  This bureaucratic solution is the result of desire of each agency to manage its own turf.

Divided authority has a much bigger effect on the cost of managing municipalities in the state.  While we would not expect the number of snowplows, or road maintainers to change much however they are managed, the cost of maintaining 565 city halls, mayors, police garages, and dog catchers is astronomical.

Having granted each town autonomy, it would be nigh-on impossible to take it back.  Citizens are proud of their towns.  They would not give back the power of self-determination.  Alphatown may not want to submit to Betaville by merger or annexation.  The mayor and council of Charleston may enjoy a strong position they are unwilling to cede.  The town constable is looking forward to retiring as a chief.

It’s not as if this observation is something new.  New Jerseyans recognize it.  They just want rationalization of government to happen in everyone else’s town.  Their town is different.  Shore towns have expenses related to seasonality.  Camden and Newark have expenses related to size.  Indeed, researchers at Rutgers concluded that the costs of municipal government in New Jersey are not related to size ( (Pfeiff, 2014).  The authors argue that New Jersey towns are not smaller or more expensive than municipalities nationwide.  They use the metric of governmental units per 10,000 population, but ignore the tiny size of our town in governmental units per square mile.  There is no reason to have a city hall every four miles.  Yes, the average municipality in New Jersey is less than sixteen square miles.

For many reasons, 565 municipalities would be reluctant to cede power to 22 counties.  A palatable path to government rationalization would have to include incentives that make it worthwhile to consolidate government units.  No doubt this would stimulate a lot of discussion.  One can only hope that this discussion would lead to a generally acceptable solution.

If we lay out real estate taxes as an impediment to growth and disincentive to business, it is pretty clear that the course we are on is unsustainable.  If a handful of towns want to keep their own high-cost government and schools, that’s fine.  If the average effective real estate tax rate remains at 2.19% compared with a national average of 1.19%, it is no wonder that companies choose not to expand or locate here.  The average real estate tax bill in North Carolina is $1,313.  In New Jersey it is $7,335 (Wallethub, 2015)

Education

New Jersey is committed to primary and secondary education.  According to Governing Magazine, the state has the fourth highest spending per student in the nation.  Our peers are New York, Connecticut, and the District of Columbia.  Our spending per student in 2013 was $18,891, according to NJ.com.  Governor Christie has spent much political capital fighting the keep the costs of teachers’ benefits and pensions down.  That fight aside, we can be proud that New Jersey schools rank second in the US, according to Education Week.

New Jersey does particularly well with its specialty high schools, teaching trades and STEM subjects.  Our community college system is nothing to write home about.  For such a successful state, we trail badly in university-level education.  We are home to one Ivy-League school, Princeton, which operates in its own little bubble in Princeton.  It has fostered an ecosystem of pharma research in the area, for which we should be proud.  A noble goal would be a similar reputation and ecosystem for Rutgers at its New Brunswick, Newark, and Camden campuses.

New Jersey needs to compare itself first with relatively young states and emulate their success with land grant colleges far younger than Rutgers 1755 founding.  Our neighbor, Pennsylvania, built a powerhouse in Penn State.  Texas, similarly, has developed UT Austin into a strong technology player.  There is no reason that our state could not do the same.

In the longer term, New Jersey needs to think about fostering a cluster of educational institutions that support and each other.  Boston, for example is home to two Ivy League universities, Harvard, MIT, as well as Boston University, Boston College, Northeastern and Tufts.  The result is that the Route 128 corridor is the second largest business incubator in the United States.  Massachusetts follows the success of the cluster of academia in the San Francisco area.  Stanford and Cal Berkeley are the reasons Silicon Valley exists.  Even Pittsburgh built a cluster in Carnegie Mellon and Pitt.  We can look across the Hudson River to see the cluster New York is building with the cluster of Columbia, NYU, and the new Cornell campus.

How to build an education cluster?

How to build an education and research cluster in New Jersey?  Pick a growth industry.  Telecommunications was the industry of the twentieth century.  Water or energy will be the industry of the twenty-first.  There is no particular reason that our targeted field needs to have a nexus in New Jersey.  Who would have thought that Yale would have one of the best forestry schools in the US?  It is easier if our chosen fields have something to do with New Jersey.  If we do, then we can use every power of state purchasing to force primary research to happen here.

We can use commuter rail as an example.  California used its purchasing power in rail to force foreign manufacturers to build plants in its state.  New Jersey for its part has budgeted a quarter billion dollars for rail transit studies.  There’s no reason why NJ could not leverage that kind of spending to make the state a center of excellence for transportation planning.

An example of a missed opportunity is the relatively small project which is the development of a Hyperloop capsule.  A hundred thousand dollars injected into this student project might have boosted our entry to the competition.  Instead, Rutgers took a minority partner position in an entry managed by the University of Maryland.  Yes, it’s a small project and very speculative.  But that’s what primary research is all about.

Priorities mean some things fall to the bottom

“New priorities” is a trite line for politicians.  Moving your favorite project to the top means others need to drop to the bottom or fall off.  What are those initiatives in New Jersey?  Making New Jersey great again probably doesn’t include heavy industry or even the hope of bringing back telecommunications.  We need to clear about what industries are not likely to grow in the twenty-first century.

Casinos

New Jersey very wisely because the sole competitor to Las Vegas in 1976.  Now that almost every state has casinos, it’s not a great business opportunity.  With five shuttered casinos in Atlantic City, why should we thing a new casino in the Meadowlands or Jersey City will be a success.  Casinos are not a growth industry.  New Jersey shouldn’t be chasing a forty year old dream.

Shopping Malls

The department store saw its heyday in the first half of the twentieth century.  Don’t fool yourself, Sears Roebuck which sold motorcycles, house kits, and insurance aint coming back.  Neither is the shopping mall.  The growth of malls came with the interstate highway system.  The heyday was the second half of the twentieth century.  Today, Amazon and same-day drone delivery are much more likely to succeed than a new mall.

Guaranteeing $800 million in bonds for the American Dream Mall in the Meadowlands is an investment in the past.  If it was such a great idea, private money would have completed the Meadowlands complex ten years ago.

Exercise your vote

When you step into the voting booth in November, support those candidates and initiatives that will grow in the twenty-first century.

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