Sunday, February 12th, 2012

Facing Tough Facts in Louisville

Some of you know that I’m originally from Louisville, Kentucky. I grew up in rural Southern Indiana just across the river (inside the Louisville MSA), but also had family in the South End and spent a lot of time as a kid stomping around the neighborhoods near Iroquois Park. I love Louisville and it will always have a special place in my heart. I don’t write about it much these days because as the blog has progressed, I’ve been forced to trim back my reading of local news sites and Louisville web pages were on the cut list. So I’m not as plugged in to what is going on there these days such that I can competently opine upon them.

But researching my four part series on the bridge deal fiasco (see part one, part two, part three, and part four) turned my attention back to the city. So I wanted to do a three part mini-series on Louisville this week.

Today I want to talk about the unpleasant strategic situation Louisville finds itself in in many areas. These are the basic facts on the ground that need to be addressed. Any credible civic development strategy needs to take these into consideration. It’s never easy for local leaders to admit, even privately, when their community is in a tough spot. But in this case we need to highlight three key areas where the data clearly indicates a challenge for Louisville, namely: it is too small, it is in a poor geo-political location, and it has low educational attainment.

Louisville Is Too Small

The first thing we need to address is that the Louisville region is frankly too small to match its aspirations. I normally focus on metro areas in the greater Midwest with more than a million people. With only 1.3 million people, Louisville is by far the smallest. And it lacks the effective population booster enjoyed by some other cities.

Consider some other metro areas on the smaller end of the scale. Say Milwaukee at 1.56 million, Nashville at 1.59 million, and Indianapolis at 1.76 million. These don’t sound that much bigger than Louisville, but consider: Milwaukee is 21% bigger, Nashville is 24% bigger, and Indianapolis is 37% bigger. This makes a lot of difference in terms of supporting region-wide amenities, infrastructure, and initiatives. For example, it explains why Louisville doesn’t have a major league professional sports team while the other cities do.

What’s more, the effective population of those similar cities is sometimes even higher. For example, Indianapolis is ringed by small industrial cities like Muncie, Lafayette, Kokomo, Columbus, etc. that are independent metro areas, but still contribute to Indy in the form of things like Colts fans, airport customers, TV market size, etc. Milwaukee’s metro area population is artificially low because Racine County, with 200,000 people and which actually borders Milwaukee County, is considered its own metro area. Just upriver from Louisville, Cincinnati benefits from being so close to Dayton that in some cases they function as one large metro. Businesses and such that locate in Warren or Butler County can draw from both markets easily.

Louisville, by contrast, is surrounded by mostly very rural, sparsely populated counties. Thus it gets less boost from an extended trade area in terms of population heft. Though in fairness I suppose there is some labor market benefit from this as well. I have read that Louisville has among the highest percentages of exurban commuting. One reason may be that there are so few job opportunities in outlying areas.

Also, while Louisville has healthy population growth and is growing a bit faster than the US average, other similar regional cities are growing too, sometimes faster on a percentage basis and quantity basis. Louisville added 121,000 people in the last decade, But Indianapolis, Columbus, and Nashville all added more than 210,000 people. This means that not only are those cities bigger, but the gap in population grew by more than 100,000 for all of them. That’s the equivalent of a Clark County, Indiana.

Recognizing that you are smaller doesn’t mean you have to mentally classify yourself as some lower tier city. (Debates over tiers of cities seems to be a perennial favorite on message boards). But it does mean you should be careful about trying to play keeping up with the Joneses, especially when it comes to major regional capital investments. Because Louisville simply has fewer bodies to spread the cost across, it needs to be very careful where it chooses to invest. (More on that later). I might also suggest that while growth is good, strategies that are predicated on changing Louisville primarily through quantitative growth are unlikely to ever close the gap versus regional peers, so I would not even have that as a goal.

Louisville Is in a Poor Geo-Political Location

A maximally geo-politically advantaged city might be one that’s centrally located and a clear primate city for the state it is in. Think Minneapolis-St. Paul. It’s as centrally located as you’d want to be in a state like Minnesota. It is the state capital and home to the state’s flagship university. It contains over 50% of the state’s population and is dominant economically. You might say as downsides that it has a twin-city structure, is near a state border, and doesn’t have the Mayo Clinic, but these are minor in comparison to what it has.

But you don’t have to be this dominant to have advantages. Indianapolis, Columbus, and Nashville are centrally located and are state capitals. Columbus has the state’s flagship university and is in an urban-dominated state. Indianapolis is the only large city in the state and thus in a sense has no “domestic” competition.

Louisville by contrast has many geographic disadvantages. It is on the edge of the state of Kentucky, not in the center. It is on a state boundary that is also a major river crossing barrier in an era where water transport is no longer king. It isn’t the state capital. It doesn’t have the state’s flagship university. Kentucky is a rural dominated state that also has a number of severely depressed areas that require significant state investment. Lexington is clearly much smaller and is in a different size class, yet conceives of itself as an equal in some ways (if not superior, especially with the UK presence) and the state often treats it as such. In fact, Lexington can sometimes been seen as a more authentically Kentucky city with its horse farms and whatnot, while Louisville is seen with suspicion.

This puts Louisville in a very tough spot. All major cities are likely net tax exporters to their state, but Louisville sends a truly staggering amount to Frankfort that it never gets back. I think it’s something like $700 million per year out of Jefferson County. The state’s priorities are generally in the rural areas. While I wouldn’t call the state legislature hostile to Louisville exactly, it isn’t really focused on pro-urban policy. As is often the case in bi-state metros, Indiana and Kentucky love to engage in “economic development” by encouraging companies to move back and forth across the Ohio River. Discussion about building bridges across the river takes up lots of leadership time and attention that could be focused on other things.

To me this makes me think that Louisville ought to plan on having to go it alone with its own resources in a lot of areas and not count on too much help from others (though obviously it should look for it where it can). We are already seeing this in the bridges project, which it appears will be mostly toll financed by local motorists. But Louisville should work hard to try to close some of the gaps that are clearly addressable. For example, better cooperation between Louisville and Southern Indiana is critical. Also,Louisville should be working to build connections and goodwill throughout the rest of Kentucky where ever possible.

Louisville Is Poorly Educated

As I’ve noted many times, college degree attainment is overwhelmingly dominant in explaining urban success. Harvard economist Ed Glaeser crunched the numbers and found that their historic college degree attainment explained nearly everything about why some Frost Belt cities succeeded and others failed. CEOs for Cities has also quantified a lot this in their Talent Dividend research.

Louisville fares very poorly here. Louisville’s college degree attainment is only 25.8%. This puts it 5th lowest among all 51 metro areas in the United States with over one million people. College town Lexington sits at 31.2% Louisville trails the overall US average of 28.2%. To be blunt, that’s not good.

I’ve always said that Louisville is a quality over quantity town. The core of Louisville has great neighborhoods. Louisville clearly punches above its weight in areas like quality restaurants. And it has had a number of notable cultural successes: the important early recordings of the Louisville Orchestra, many important indie rock performers (e.g., Will Oldham, Slint, Rodan), and items like Actor’s Theater’s Festival of New American Plays. This immediately suggests to me going for a more Madison, Wisconsin type of feel than rather than trying to ape Indy or Nashville. Unfortunately, Madison is the state capital and home to a major Big Ten School, and is smaller such that those make a huge impact there. Louisville lacks those drivers and has such low education attainment that a high end strategy would be tough to pull off except in just a small portion of the old city.

This is really going to inhibit Louisville on the economic development and there isn’t a lot you can do other than focus on blue collar industries in the short term (their huge UPS hub being a prime example of this), with a more selective and focused strategy around high end sectors, while working to boost educational attainment over the longer term. There’s some good news here in that Louisville grew its educational attainment rate by nearly five percentage points in the last decade, 16th among large cities.

Good and Bad Applications

I’d like to highlight a couple examples quickly of how Louisville has excellently and poorly handled its strategic situation.

Let’s start with the good. Mayor Greg Fischer decided to make as one of his initiatives seeking to find better ways to collaborate with Lexington, which is only about 75 miles away. As the Courier-Journal noted, “he envisions Kentucky’s two biggest cities adding jobs as a ‘super region,’ rather than competing over companies, private investment and state money.” I had a previous post on this very topic that includes a video interview with Fisher called “Super-Regionalism in Kentucky.” This is an example of Louisville recognizing that it is too small to go it alone in the marketplace and it would be better to have a partner, plus trying to build bridges to a historic rival. We’ll see how this turn out.

A not so good example is the Ohio River Bridges Project I mentioned earlier and linked to my series about. Here we have a region taking on a huge $2.5 billion capital project that is going to be paid for mostly with local money through tolls. A smallish region like Louisville that isn’t even growing particularly fast does not need to be building this type of gargantuan and expensive infrastructure. That’s why in my series I suggested significantly scaling back the project even further.

Better Benchmarking

On another but related note, I’d also like to highlight how Louisville benchmarks and measures itself against the wrong cities. In the popular press, Louisville is generally compared against Indianapolis and Nashville, and those other cities are often trotted out as a rationale for pursuing some policy. For example, local leaders said that Indy and Nashville had city-county mergers. Indy and Nashville were growing much faster than Louisville. Ergo, Louisville needed to merge city and county government if it wanted to catch up.

I’m not saying merger was necessarily wrong. The problem is that Indianapolis and Nashville are nothing like Louisville. They are in the same rough size category (though bigger as I noted) and nearby, but that’s about it. I’m not sure there’s a whole lot Louisville can learn from looking to those places.

On the other hand, a city like Cincinnati is much more similar to Louisville. It’s also a historic major river city in a multi-state metro, on the edge of the state, not the state capital, with rival cities inside Ohio, etc. It also shares the same type of insular culture (maybe even moreso). Yes, it’s bigger, more educated, and home to many corporations in a way Louisville isn’t. But it seems like there’s a lot that could be learned from comparisons there. If I were Louisville, I’d be looking to benchmark against other river cities, not places that are so different. When you look at how many of the historic river cities have fared, you see that most of them have struggled demographically and economically. Comparatively, Louisville actually looks quite good.

However, you rarely see Louisville comparing itself or looking to Cincinnati. Perhaps it’s because Cincy was always the “big city” for people in Louisville. It was perhaps always seen as in a different league than Louisville in a way say Indianapolis was not. Whatever the case, I’d suggest starting with Cincy and expanding to other older river cities.

To illustrate what I’m talking about, just check out this article that talks about Indy being the city Louisville should have been through the lens of the Super Bowl. I love this piece because the article itself and the reactions perfectly illustrate Louisville’s bi-polar nature, vacillating between self-flagellation and smug superiority. In any case, while I appreciate that Louisville being on the border between Indiana and Kentucky spawns some understandable rivalries between states, the comparison to Indy is flawed. I don’t believe Louisville could ever have done with sports what Indy did, even if it tried. That’s not a path for Louisville to regret going down. Nor is the type of downtown-centric development approach of Indianapolis a particularly good fit for Louisville IMO. (I’d tell Indy similarly that they aren’t likely to ever be able to replicate Louisville’s best qualities). I see articles like that one periodically, but rarely any similar articles featuring Cincinnati or another similarly situated city. Louisville needs to take stock of its situation and look for comparison places that more match its own situation.

Next up, a guest poster will take a visit to downtown Louisville. And I’ll revisit an old idea I had for the city.

More Louisville
Louisville: An Identity Crisis
The Case for 8664
An Examination of City-County Consolidation

Topics: Demographic Analysis, Economic Development, Education, Public Policy, Strategic Planning, Urban Culture
Cities: Louisville

53 Responses to “Facing Tough Facts in Louisville”

  1. Jeff Gillenwater says:

    Thank you, Aaron. I’m not decrying the UPS presence in Louisville. It’s simply a matter of looking forward and preparing for inevitable changes in distribution models.

    If handled wisely, Louisville can continue or perhaps even increase its share of that market over the long-term without significantly damaging quality of life a la riverfront destruction, poorly located airport expansions, and an unsustainable reliance on inefficient fossil fuel use. Air and road freight were the “new” waterway and rail fifty years ago. Louisville leadership still thinks it is and, as you say, has lagged instead of lead in terms of urban dynamism.

    Given its geographically derived heritage and future prospects, regional leadership would do well to position itself in the center of alternative modes advocacy and development. Instead, they’ve expended myriad resources advocating for the exact opposite. Even when the federal government very publicly announced strong funding preference for alternatives (including related housing funding), they pitched a decades old model as “innovative” and acted somewhat surprised when passed over multiple times, leaving many of us to say “I told you so”. If anachronism is the thing, they’d actually do better in preparing for the future by looking 100 years back instead of 50. Our regional transportation system was more appropriately balanced then.

    @RyderCup2: No, I’m not talking about purely custom manufacturing. You’ll note that I mentioned starting with increased localization of our food system. Tiny little Floyd County,IN alone exports millions in food related revenue each year in pursuit of lesser quality food than what’s readily grown and deliverable within a relatively small radius. All the while, regional farmers struggle with volatile pricing, poor wholesale relationships, and/or are heavily subsidized while desperately trying to maintain farms at a scale that damages soil and water quality and destroys much needed biodiversity. That’s not only unnecessary, it’s just plain dumb.

    There are stable jobs to be had in food related start-up industries as well, not to mention tie-ins with our already well-known independent foodie scene.

    Otherwise, we start looking at other commonly used items, create local investment instruments for capital development, and start producing and selling them on a reasonable scale. If no one else, craft brewers in the area have shown us the way– and there’s another foodie market tie-in and another agricultural connection. Purdue and other ag schools around the country are engaged in hops research as we type.

    To the extent one buys into them, all of the above also fit pretty neatly into the usual creative class talent attraction and retention models as well. Imagine a comparatively affordable, well located neighborhood with at least minimal transit access in that mix and the “nice place to live” almost starts seeming real.

    Regarding the music connection, you can argue exact mileages if you wish but that’s not the point. Louisville sits on the direct path between two of the country’s historic music centers with distinctly different styles. Musicians that play in both markets have overlapped, lived here, and sometimes grown up here for decades. That their respective styles blend and come out as something noteworthy in a metro so located isn’t altogether surprising. The bands Aaron mentioned developed somewhat differently from that in terms of aesthetics, but it’s been interesting to see a lot of them more fully embrace and reinterpret those more traditional forms over the years.

    Tourism/conventions can be a part of the puzzle as well. What is it that we have to sell to them beyond an every-city meeting space? On which markets do we focus our “come hither” efforts?

    Mass transit between the airport and downtown makes sense but southern Hoosiers account for what, somewhere around 50,000 river crossings per work day? Do you really think near total reliance on single occupancy vehicles is the best way to handle that?

    Louisville, like too many other cities, freaks itself out worrying how in the world it’s ever going to fit into a massive, globalized mechanism without ever paying much attention to underlying assumptions. That’s a whole other conversation, but one the sum total of regional leadership needs to have.

  2. Alex Pearlstein says:

    What puzzles me about Louisville is that it seems to have all the hallmarks of being more of a talent-driven city. Cool neighborhoods. a “Keep Louisville Weird” ethic (at least in pockets). Major university. Stable economy with strong healthcare sector and a base of HQs (Humana, Yum, UPS hub) to provide good entry level work for B-school grads. And yet its educational attainment is so piss-poor that it is clearly not an attractor for educated talent. Or maybe the issue is that it doesn’t raise up its own; aren’t its schools notoriously underperforming and its minority poverty rates staggeringly high? Regardless, Louisville has always seem like a city that should be more prominent that it is. Maybe it all comes back to leadership. The fact that the ORBP is supported by the power structure while 8864 gets short shrift is incredibly telling. In the “cities of tomorrow” (Portland, SF, OKC, Denver, MSP, etc.) I can’t imagine such a no-brainer opportunity being squandered.

  3. John Morris says:

    So what are Louisville’s cool neighborhoods? I know I can google, but I’d like to hear more about them.

    I have a big issue with the whole idea that a city has to depend on the downtown to “carry the brand”.

    When one thinks of Columbus, one thinks of The Short North. Pittsburgh’s brand for years was carried by The South Side and perhaps the Strip. Cleveland is getting lots of buzz from the West Side neighborhoods of Ohio City, Tremont and Detroit Shoreway which are doing a lot more to change perceptions of the city than many of the downtown “attractions”.

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