Module 3: Downtown Development

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MODULE

Seminar in Urban Problems

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University of Memphis Department of Public &

Nonprofit Administration

Euchner & McGovern (2003) Chapter 3 – Economic Development and the

Construction of Opportunity

3

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Economic Development and the Construction of Opportunity

 Economic development:  “Stimulating business investment to expand

employment and tax revenues”  Promote economic activity that spurs the

involvement of multiple groups of city citizens into productive city life

 Most city leaders view economic growth as the key to urban revitalization

 Key question – growth is typically viewed as a good thing, but how to promote growth that is equitable for all city citizens?

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The Rise and Fall of the Urban Economy

 1900th century – golden age of cities due to industrialization and urbanization

 Early 20th century – too much success led to countertrend in growth and rise of complex urban problems

 Middle 20th century – widespread deindustrialization decimated many cities  Evidence – manufacturing declined between 51-

64% in major cities  Factory closings rippled throughout

neighborhoods  Suburbanization sky-rocketed

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The Rise and Fall of the Urban Economy

 Suburbanization  Many of those who could afford to move out of

the city did so  Racial discrimination drastically limited the

mobility of people of color (e.g., “redlining”)  Perfect storm – unemployment rises and tax

revenue falls  City leaders feared raising taxes would

cause further erosion of tax base; but cutting of services would reduce quality of life and also cause further erosion

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Urban Renewal

 1960s and 70s – city leaders focused on drawing business investment through improving downtown business districts; need not focus on neighborhoods decimated by deindustrialization  Believed this was the only way for renewal  Put faith in trickle down economics  Wanted to create a post-industrial economy

based in professional jobs with large corporate headquarters (information technology, services, communications)

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Urban Renewal

 Public-private partnerships (3Ps) drove downtown redevelopment with the support of the Housing Act of 1949 (aka “urban renewal”)  City government would use eminent domain to take

“blighted” from private residents to clear it for redevelopment by private investors

 “Blight” clearing often meant destroying stable Black neighborhoods, and displacing residents to scattered public housing projects

 Private investors often built profitable buildings, rather than affordable housing

 Civil Rights movement in late 1960s helped to slow eminent domain and urban renewal

 “Urban renewal” program was consolidated in the Community Development Block Grant (CDBG) in 1974

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Inducing Business Investment

 1970s onward – city leaders continued to follow “logic of growth politics”; “attract and retain capital investment by persuading businesses to locate downtown”

 How does city hall attract businesses?  Change city tax policy to create a favorable

business tax culture (low overall tax burden and tax incentives/breaks)

 Costs vs. benefits to the city of changing city tax policy to attract businesses continues to be debated

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Inducing Business Investment

 Downsides to downtown development:  Gentrification prices current residents out of

their neighborhoods  Exacerbates income inequality – usually includes

high-paying and low-paying jobs, but few middle-class jobs

 Downtown growth doesn’t trickle to the neighborhoods that need assistance

 Linkage policies have attempted to force downtown development to community revitalization, with mixed results

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Enticing Visitors to the City

 Economic development driven by city tourism gained traction in the 1990s  Widespread building of convention centers, arts and

entertainment buildings, music venues, museums, sports arenas, etc.

 Marketing existing arts and cultural opportunities more aggressively

 Waterfront development  Large bourgeois city shopping malls

 Goal: attract visitors with a single “attraction”, get them to go to other attractions/retail, and ultimately get them to come back with more visitors

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Enticing Visitors to the City

 Tourism-based urban policy is not the solution to community revitalization, but can serve as a “catalyst” to spur city growth and create city pride (think sports teams)

 Even better when such policy encourages mixing of different city populations in civic spaces

 Major criticisms:  Doesn’t do anything for actual city growth  Tourism buddle can burst – new attractions

become old, lose appeal  Turns cities into artificial Disney Worlds

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Neighborhood Revitalization

 Neighborhoods decimated by deindustrialization received little attention until 1950s/60s civil rights movement and 1960s race riots

 Federal response was a “War on Poverty” and LBJ’s “Great Society”

 1970s/80s – spending on Vietnam War, inflation, rising unemployment and perception that government was the problem not the solution quickly led to retreat of the Great Society ideals

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Neighborhood Revitalization

 Economic development hasn’t aligned well with community development – “Cities should return to the traditional strategy for fighting poverty of tending to people’s material needs by providing income support, food stamps, housing vouchers, and basic health care.” (p. 117, via Lemann’s 1994 NYT article “The Myth of Community Development”)

 People-based policies that enhance an individual’s opportunity for their own economic growth

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Neighborhood Revitalization

 Other people-based policies:  Residential dispersion (HUD’s MTO)  Improve transportation options (including public

transit) for inner-city residents  Address racial discrimination in hiring practices

 Place-based policies haven’t had their intended effect on revitalization:  1980s Enterprise Zones  1990s Empowerment Zones

 2000s and 2010s business improvement districts (BIDs) are place-based policies with substantial private involvement – mixed results

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Redirecting Economic Development Policy

 Economic development that focuses on “downtown” and ignores neighborhoods doesn’t work  “Widespread poverty in the neighborhoods

will always be a drain on public resources, a source of upward pressure on taxes, a reason for continuing middle-class flight from the city, and a deterrent to future investment.” (p. 124)

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Redirecting Economic Development Policy

 Potential policy responses to improve economic growth in neighborhoods:  Cooperate – not compete – with other cities

to attract investment  Linkage policies tying business investment to

neighborhood revitalization efforts (local jobs, affordable housing, mass transit, etc.)

 Create performance agreements with business investments

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Redirecting Economic Development Policy

 Imbroscio’s (1997) alternative approach to economic growth in neighborhoods  Entrepreneurial-mercantilist strategy  City officials identify new market opportunities to

improve public ends (i.e., be entrepreneurial)  Municipal-enterprise strategy  City owns economic enterprises (utilities, airports,

hospitals, etc.) to maintain control over profits  Community-based strategy  Support grassroots, community-owned nonprofits to

lead neighborhood redevelopment (e.g., CDCs, community land trusts, worker cooperatives)

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Redirecting Economic Development Policy

 What’s needed?  Urban policy rooted in communitarian principles  “The redirection in economic development may

require a more active role for government to ensure a more equitable distribution of the costs and benefits of economic growth, a stronger effort to give all citizens a meaningful stake in decision-making processes, and a renewed commitment to revitalizing urban places.” (p. 134)