A while back, we talked about how much money would find its way back into your pocket if you went from being a two-car to one-car family (here). At the end of that article, I alluded to the the financial gains that our communities would also see as a result of this shift.
So we’re starting today with the premise from the last article – you have an extra $540 per month in your pocket. It’s great for you – what does it do for your community?
It’s no secret that New York City’s high density, extensive transit and excellent walkability are fundamental contributors to the lifestyle enjoyed by its citizens. However, as this study shows, these factors are also major contributors to their economic well-being. Because New Yorkers drive substantially less than the average American, they realize a staggering $19 billion in savings each year — money that their counterparts in other metro areas spend on auto-related expenses. And because they spend so much less on cars and gasoline—money that quickly leaves the local economy—New Yorkers have much more purchasing power to spend locally, stimulating the city’s economy.
(The whole article is well worth a read, by the way. The link again HERE.)
It’s tempting to think that this is unique to New York City, but the economic principles are the same everywhere – and we DON’T have to operate at NYC densities in order to make it work. We’ll start by looking at why keeping money in the local economy is desirable, and then circle back around to how that relates to car ownership.
When it comes to the local economy, the basic principle at work is called the local multiplier effect. Here’s how it works: You have $10 in your pocket. You go to Lemonjello’s and get coffee for you and your kids. That $10 pays a staff member, who goes down to New Holland Brewery and tries a Black Tulip Tripel Ale (which is great, by the way). The chef takes the $10 spent there to the Holland Farmer’s Market to buy tomatoes for the salads. The farmer then takes the $10… you get the idea? This $10 has already functioned as $40 in our community, and it continues to be recycled through our local economy.
Obviously, it’s not quite that simple. Lemonjello’s uses a local roaster, but the coffee beans themselves are certainly not grown in Michigan. New Holland probably gets some of their restaurant supplies from Sysco or some other national retailer. There’s an attrition of dollars to national or international interests. There are benefits to this as well, but it stops that multiplier effect in its tracks.
Here’s the rub: Local businesses recycle many, many more dollars through the local economy than chain businesses do. Chain stores are able to be price-competitive because they take advantage of economies of scale, which they do by purchasing in large quantities from centralized suppliers. As a rule, they also don’t pay very well. Because of this the vast majority of the dollars that we spend there leave the local economy, as the chart below shows.
Here’s where this ties in to our car discussion: Most automotive spending functions in the same way as a chain retailer does. About 73% of the money we spend on gas purchases and 86% of the money we spend on car purchases immediately leaves the local economy (here). It’s a similar story for insurance.
Now, if you dropped a car and then spent every penny you saved in that transaction at Walmart and Applebee’s and Lowe’s, there would be essentially no impact on your community. You still win, but it’s a wash for your community. The dollars still leave.
But you won’t do that.
There’s a reasonable argument that local businesses will do better with more bicycle an pedestrian traffic than the big-box retailers just because they’re more accessible and neighborhood-based. It’s easier to run past a neighborhood business than it is to traverse the Walmart parking lot (do they make those things nightmares on purpose?) if you’re on foot or on a bike.
My back-of-the-envelope calculation indicates that the Holland-Zeeland area would see as much as $300 million* returned to the local economy^ EACH YEAR if every two-car household became a one-car household.
To put that in perspective, the City of Holland is currently trying to raise $2.1 million to repair the DeZwaan windmill. Cleaning up Lake Macatawa is expected to cost $12 million. We could do both of those projects in January, then build the equivalent of the entire lauded Portland bicycle system by June with that kind of savings.
(According to Elly Blue’s Dinner and Bikes presentation, this system cost $65 million to implement – and that over the course of over 20 years. In Grand Rapids, bike infrastructure has been costing about $10,000 per mile.)
Yes, I know that’s not how it really works. But it serves to illustrate just what an insane amount money we’re talking about here, even with necessarily imprecise numbers. And it doesn’t take into account savings due to:
- decreased health care costs as a result improved health due to more active transportation
- decreased health care costs as a result of fewer motor vehicle collisions
- decreased infrastructure costs as a result of fewer traffic lanes needed
Now, it’s true that there would also be costs to owning and maintaining fewer cars. Oil change shops, car dealerships, and repair shops would suffer; some would go out of business. And because some sort of transportation would still be required – bus, bike, or feet – a certain amount of savings would be offset by these costs. The net gain is still mind-blowing.
The question is, what would it take to get there? And what are our biggest barriers? Logistics? Politics? Culture?
What do you think? Would it be worth it to you to shoot the moon and go for crazy?
After I finished writing this, I asked that the good folks over at the Strong Towns Netowrk check my numbers, and they steered to a series that Elly Blue (yes, of Dinner and Bikes!) wrote on the very same topic. You can find the first installment HERE – I recommend it highly. And last month, Copenhagenize did a similar breakdown for the city of Seattle.
*The average household size in Michigan is 2.51 people. The population of the Holland metropolitan area (the cities of Holland and Zeeland, Holland Charter Township, Park Township, Laketown Township, and Zeeland Township) is around 108,000. This means there are about 42,835 households in our area. As of 2007, a statistically average household owns 1.9 vehicles, so I rounded up to two. So at two cars per household, that’s about 85,670 vehicles at $7,000 each.