Urban economic development

...both heavy and light industry in every region of the country suffered declines, with reduced urban tax bases...

...Although publicprivate cooperation is the common theme underlying all economic development, programs vary widely in their emphasis on private profit vs...

...Cities have traditionally approached economic development problems through a growth model that equates economic viability with the growth of private investment...

...One of Hartford's first projects was to buy an abandoned department store, convert it to offices, and lease it to an airline...

...Thus, it requires that a certain percent of city construction money go to minority-owned firms and that city contractors hire a certain percentage of minority workers...

...The most prominent of these shifts was the institution of Community Development Block Grants and the demise of such urban programs as the Urban Renewal program...

...All three goals could have been addressed by either a growth model or a social return model...

...Despite the rhetoric of local autonomy and freedom of choice, however, federal urban policy currently supports a relatively narrow range of local initiatives...

...In the past fifteen years, the health of the local economy has become the pressing urban policy issue...

...Such cities have widened their streets, added parking facilities, and reduced their density by building taller structures surrounded by open space...

...each, however, has inherent problems that make it less than ideal for cities...

...Both Enterprise Zones and UDAGs are public subsidies to private companies to entice them to locate or expand in particular geographic areas...

...The social-return model is a viable policy that has already been used effectively...

...Many of these are reaffirmations or extensions of traditional zoning and planning policies...

...The city won its challenge...

...WINTER • 1989 • 17...

...It would be a provocative challenge for the Bush administration to reshape an urban agenda based not on the politics of growth but on social responsibility...

...One of the best-known examples of a linkage program is San Francisco's policy of requiring downtown developers to subsidize low-cost housing, transit services, and day care...

...First, competition among cities for these growth industries is fierce...

...The range of policies cities use is constricted by the limits of what city officials think can be achieved...

...The growth model, although dominant, is not the only existing philosophy of economic development...

...Development policy that stresses manufacturing is derided as "smokestack chasing" while local governments pursue tourists, shoppers, and corporate offices...

...One is the quality of the natural environment: public incentives can be used in a way that prevents (or compensates for) increases in pollution, congestion, and use of natural resources produced by development...

...The Copley Place project in Boston, combining retailing and office space with a hotel, convention center, and apartments, was partially financed by an $18 million UDAG obtained for it by the City of Boston...

...The third strategy, used mainly by older industrial cities, is to compete with new cities and suburban areas by imitating them physically and socially...

...The centerpiece of the Reagan plan for the cities is the Enterprise Zone...

...What emerges, however, is a garrison-like upper-middleclass compound surrounded by a ring of economically depressed areas, a mirror image of urbansuburban income inequality...

...The Grand Avenue Mall in downtown Milwaukee, a $70 million project, had nearly half of its costs paid by the city and federal governments, in the form of UDAG and Community Development Block Grant funding...

...Despite the apparent drawbacks of these strategies, cities adopt them with such regularity as to prompt an inquiry into why...

...Because tourism leads the list of growth sectors, many cities are creating "amenity infrastructures" —convention centers, marinas, museums, and luxury hotels...

...Furthermore, even when cities are able to capture these industries, much of the employment so generated is in low-wage clerical, sales, janitorial, or food-service jobs...

...The city gained the rental revenue from the occupied building as well as jobs for city residents, whom the airline was required by agreement to hire...

...For example, companies receive public subsides not for increasing overall employment but for hiring targeted populations (e.g., minorities, young people, displaced workers), providing on-the-job training, or otherwise benefiting economically deprived groups...

...Analysts such as Robert Goodman also argue that as more cities compete by offering economic incentives, the advantage for any individual city is diminished...

...Although the older manufacturing cities are most in need of an energetic policy, the issue is a top priority for virtually every city administration...

...Changing political conditions have also affected cities' responses to economic problems...

...The City of Syracuse has spent $4 million to buy twenty-nine rooms in an "investment condominium" being built by Syracuse University for campus conferences...

...public benefit...

...One common strategy is to target growth areas in the economy and attempt to increase the city's share of those activities...

...Another is the quality of the built environment: building heights and ground coverage can be limited, public as well as private space can be provided, historic structures can be protected...

...Businesses have come to expect them and so can threaten cities with moving, thereby extracting ever increasing concessions...

...This model examines what planners call the "distributive effects" of policy actions, judging policies according to what benefits they may provide to those who need them most...

...An alternative approach, one stressing social return for public investment, is becoming increasingly prominent...

...Cities have even tried to "copy" the suburbs by encouraging gentrification of poor and working-class neighborhoods...

...Hartford, Connecticut, has also implemented social-return policies under the leadership of City Council member Nicholas Carbone...

...Another policy used to aid "distressed" urban areas is the Urban Development Action Grant (although this may be eliminated from the current federal budget...

...These include tax abatements, land write-downs, free buildings, and publicly supported financing through tax-free bonds...

...Investigation also suggests that, in granting tax abatements to investors, cities may not generate sufficient growth in the local economy to compensate for revenues passed up, resulting in net decreases in income to the cities...

...Krumholz used what he calls "equity planning" to ensure socially responsible results by increasing choices for residents that have the fewest and by not letting the burden of a shrinking city fall on the poor...

...Louis, Detroit, and Cleveland lost from 20 percent to 30 percent of their populations...

...Because these are the only two major economic development tools available to cities, it is not surprising that there are so many similarities in the approaches cities are taking...

...The most recent development has been linkage policies, linking a developer's permission to undertake any large-scale project with payments (in cash or in kind) to support targeted services in the city...

...Three of the most common strategies are described below...

...But another factor is the set of assumptions that public officials bring to the analysis of their problems...

...This flew in the face of a "good business climate," but Hartford decided that the city would be reluctant to support private projects if the business community insisted on supporting the property tax change...

...One reason is that they face similar economic conditions resulting from the economic reshuffling of the 1970s and 1980s...

...The "gritty cities," however, were not alone in losing manufacturing jobs...

...Those cities that were hurt the most had economies based on large-scale manufacturing...

...The Reagan administration has encouraged this direction...

...New York City's South Street Seaport has received more than $20 million in public aid...

...A New Battleground These projects are all examples of the much touted public-private partnerships using public investment to attract private investment...

...Although this growth model has achieved the status of folk wisdom, evidence is mounting that it is inadequate for understanding local economies...

...Oakland, California, is another city that has taken a social-return approach to economic development...

...Hartford's goals were to increase the number of jobs for the un- and underemployed, to improve the city's fiscal condition, and to revitalize neighborhoods...

...Less sanguine about the results of private-sector economic leadership, they are increasingly looking for new models of publicprivate cooperation...

...Each tends to stress private profit, responding to the "needs" of investors...

...One of its most prominent advocates is Norman Krumholz, former city planning director of Cleveland...

...This approach holds that the role of public policy is to protect and enhance the common good against the potential abuses of private enterprise...

...The city can also use its own investments to increase the level of public goods and services available (e.g., municipal ownership of utilities, parking garages, and health care facilities), rather than using city money to subsidize private operations...

...Blocked as national legislation, it has been passed (in modified form) by more than twenty states...

...Back-office corporate operations, which cities support by subsidizing new office space and enhancing commuter transportation facilities, belong in the same category...

...In a second project, Hartford officials challenged a state reassessment of property tax that would have shifted the tax burden from businesses to residents...

...unfortunately, they have been eroded in the competition to give incentives to the private sector...

...A review of city strategies reveals a common wisdom on economic development...

...Boston has also used this policy, requiring developers to hire city residents and to pay into a fund for low- and moderate-income housing...

...The social-return model assumes that public investment should have a public return...

...Under his direction (which overlapped the Kucinich administration), Cleveland attempted to expand the publicly owned electric company, shifted transit and park funding to a wider tax base, reorganized trash collection to maintain delivery schedules despite decreasing revenues, and "landbanked" taxdelinquent properties for future resale by the city...

...Several different issues arise here...

...Decisions about projects are based not on the goals set by the private sector but on the private sector's cooperation in meet Comments and Opinions ing goals set by community leaders and public officials...

...Another mixed-use development, Town Center in Charleston, West Virginia, was helped along by the local authorities, who issued $24.5 million worth of tax-free revenue bonds to raise capital for its construction...

...It assumes that employment, property taxes, and all local revenues are derived only from increases in private investment...

...Although this seems logical enough, this strategy does not always work...

...Consider the following examples: • Brooklyn's Albee Square Mall, a shopping center constructed in an abandoned theater, was financed by an Urban Development Action Grant (UDAG...

...Similar economic and political conditions explain some similarities in how cities choose strategies for economic development...

...Where public-private partnerships use public investment for public return, linkage policies use private investment for public return...

...Over the past decade, national urban policy has undergone a series of programmatic and ideological shifts with the expressed aim of returning autonomy to local governments...

...Presumably private economic growth would increase public revenues...

...Battles over building height limits in San Francisco and Philadelphia and air rights in New York are cases in point...

...This threat can amount to blackmail, as in the notorious case of the General Motors plant in Detroit, and the less well-known cases of the New York Stock Exchange and the Philadelphia Eagles WINTER • 1989 • 15 Comments and Opinions football team...

...the difference is that the growth approach begins with incentives for private investors while Hartford's began with the public good and benefits to the poor...

...Or, as happened with Playskool in Chicago, companies can take the incentives and leave anyway...

...The difference is that Enterprise 16 • DISSENT Zones target areas on the basis of poverty while UDAGs target projects on the likelihood of leveraging private funds for them...

...Unfortunately, within most communities, planners and officials share the same view...

...They have built enclosed shopping malls to compete with their suburban counterparts...

...Oakland also has channeled its land write-down programs through minority- or neighborhood-controlled local development committees to ensure maximum community participation in setting goals and implementing programs...

...In another familiar development strategy, cities provide incentives to existing businesses to remain in the city...

...For example, a city can require that any subsidized firm provide public facilities such as recreational space or public services such as day care...

...For example, a major study by David Birch found that increases in capital investment by firms do not necessarily lead to proportional increases in employment...

...Furthermore, most cities are willing to provide hefty public subsidies to stimulate that kind of private investment in their downtown areas...

...Amid discussions of economic recovery and the successful transition to a service sector base, many urban planners and public officials are still concerned about the future...

...Between 1970 and 1980, for example, cities like St...

...Inclusionary zoning policy, in which developers must agree to provide a certain number of moderate-priced houses in their new subdivisions, is another example...

...A third issue involved is the social balance of population: measures can be taken to ensure that a mix of incomes, ages, and ethnic groups can coexist in a city...

...Oakland's particular concern has been to increase economic resources for its minority community...

...This is based only partly on political reality...