Monday, November 12th, 2012

Chicago’s Northwest Indiana Advantage

This article is part of the State of Chicago.

Chicago is in effect a tri-state area consisting of parts of Illinois, Indiana, and Wisconsin. The lion’s share of the population is in Illinois. Also, the city is by far the largest municipality in the area – it’s bigger than a lot of states. This leads to a very Illinois-centric and Chicago-centric civic leadership and view of the world. Perhaps rightly so.

However, Chicago, looking for advantages where ever it can, should seek to find them in collaboration with the other states. Today I’ll examine the case of Northwest Indiana. The four county area that is technically part of Chicagoland – the Gary, IN Metropolitan Division – has over 700,000 people in it, which is pretty sizeable in its own right. It is also very culturally and aligned with Chicago, with significant Eastern European, Black, and Latino populations.

One advantage the area has is that Indiana’s entire approach to governance and economic development is very different from Illinois. Indiana has been implemented a “bare bones” model focusing on fiscal conservatism and seeking to be tax and regulation advantaged relative to the Midwest. Illinois has been grossly financially irresponsible, but has also been willing to invest in building a base in high-end and knowledge economy businesses, global connections, etc.

The types of high end firms that are in the Chicago Loop simply aren’t going to move to Indiana, likely not even to an Indianapolis. I never took seriously the CME’s threat to leave, for example. Northwest Indiana is also not likely to develop the type of entrepreneurial high tech cluster that Chicago has.

On the other hand, there are lots of businesses that wouldn’t touch Illinois with a ten foot pole. Some of these might be willing to locate in Indiana, however. My idea here is that Northwest Indiana should seek to find businesses for which proximity to Chicago and a Midwest is an advantage, but for which Illinois is particularly hostile in a legal/regulatory way, or in which Indiana has particular advantages.

Not only does Northwest Indiana need the investment and jobs itself, so do the South Suburbs of Chicago. And they are in easy proximity to NWI. Also, these suburbs, being outside of Chicago’s favored quarter type areas, are not well positioned to thrive from the Illinois strategy. Indiana jobs might benefit their residents quite a bit.

Additionally, Northwest Indiana has one of the largest heavy industrial zones in America. Despite the decay of Gary, plenty of steel is still made in the region. I believe Indiana is still America’s #1 steel producing state. I can’t imagine America will ever build many if any more areas like this. But we still have heavy industrial needs. So Northwest Indiana is one of the few places to put them.

A perfect example is BP’s $3 billion upgrade of its Whiting refinery. A lot of environmentalists opposed this. Unfortunately, America still runs on gasoline for now and we have to refine oil until we can replace it with something else effectively. Given the disappointing sales of electric cars to date, we’re not there yet. Transit is also not a realistic replacement at this time. If you are Northwest Indiana, why not work to build up this base? It won’t happen in Illinois. There’s a good reason there aren’t steel plants there any more. And the city and state would fight the development of any heavy industrial developments that did want in.

Gary would also be a logical place to put a third Chicago regional airport, though I’m not naive enough to believe that this will ever happen. Which highlights the benefits of the ideas above: Northwest Indiana doesn’t need cooperation from Illinois to make them happen. Yet, unless it involves cross-state poaching, Illinois would actually benefit. I do think some poaching is inevitable, but even here it might not be all bad. Some of the businesses that leave Illinois for Indiana might be ones that would be departing the metro entirely if they didn’t have the NWI alternative.

The key is to specialize and differentiate, taking advantage of your complementarity to be able to have a larger addressable market than if all parts of the region tried to be the same. This is easier to pull off when, as in this case, you’ve got multiple states who can have different fiscal and regulatory approaches.

Of course, for Indiana to take advantage of this it needs to have its act together. It’s the most politically fragmented part of the state of Indiana, and the various municipalities and counties have rarely worked to together. Congressman Pete Visclosky, who represents the area, has tried to use his regional mandate as a platform for bringing parts of the region together. This is especially admirable given that local governance is not part of his remit.

Other problem in the area is its heritage of corruption, as with Chicago. Sadly, rather than try to differentiate away from Chicago, NWI too often imitated it.

Northwest Indiana is also a Democratic political monoculture. Whenever you don’t have competitive elections, that is bad given the lack of real accountability to the voters. I’d say the same of various monolithically Republican suburbs.

Still, I believe that, despite serious challenges, especially with the decayed northern part of Lake County, there are plenty of economic opportunities to be had.

Oh, and Northwest Indiana is also home to America’s best brewery.

16 Comments
Topics: Economic Development
Cities: Chicago
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16 Responses to “Chicago’s Northwest Indiana Advantage”

  1. Rob says:

    Gary does indeed have a regional airport… one they renamed to Gary/Chicago International Airport some years ago… but you could be forgiven for forgetting it exists:

    http://www.nbcchicago.com/investigations/unit-5-chicago-plan-truth-gary-chicago-airport-taxpayer-subsidy-175902941.html

  2. the urban politician says:

    I see what you are saying here, but you seem to be shaping this argument as “Chicago should take advantage of the proximity of lower-tax, lower-regulation NW Indiana” when the real point you should be making is that “Indiana should be taking advantage of its NW corner’s proximity to Chicago”.

    Other than casinos, I don’t see Indiana doing much to promote that corner of the state. Wisconsin, on the other hand, seems much more proactive. There was a recent conference on “Milwaukee’s role in the megapolis”, Wisconsin supports the Hiawatha train, which is one of Amtrak’s most on-time passenger routes. Wisconsin has invested a lot in Mitchell Airport, which is now one of the fastest growing airports in the country.

    Indiana, on the other hand, seems to view the NW corner of its State as an afterthought and seems more focused on Indianapolis. I don’t see why you have to choose between one or the other…

  3. TUP, I am arguing that Indiana should take advantage of Chicago. Not in the sense necessarily by taking things away from Chicago, but by looking to tap into Chicago’s energy while finding its own unique “role on the team.”

  4. Steve says:

    This is kind of off topic, but I wonder if you will be writing on how the recent storm in New York could eventually affect Chicago’s ambitions as a global city. Do you think the storm (and the climate change implications surrounding it) will create any long term worries about the vunerability of the East Coast? Could this eventually work in Chicago’s favor? Chicago certainly seems like it would be far less vunerable than either coast in terms of natural disasters.

  5. Paul says:

    The January 2007 comprehensive economic development plan for Northwest Indiana [available at http://www.in.gov/rda/files/RDA_ReportUPDATED1_16_07.pdf envisioned that:

    “[Gary/Chicago] Airport [will] enplane over 4.8 million passengers by 2020. Many will travel from Chicago, avoiding the congestion of O’Hare and Midway. Others will come from the northwest Indiana region, gladly trading the two hour drive to the Chicago airports for a quick trip to Gary. Travelers will arrive to the Airport from easily accessible freeways or via the nearby South Shore commuter rail station . . . [S]ervice [will be available] to popular destinations across the country and around the globe.”

    Development of Gary/Chicago was modeled on the plan used at Manchester-Boston and envisioned an airport with passenger operations on the scale of Indianapolis International.

    The reference to Manchester-Boston highlights what is wrong with the plan. Manchester has “taken off” because Southwest operates from the airport. Southwest though is already well positioned at Chicago Midway and would have no interest in developing a potentially competing airport. And it is hard to imagine anyone thinking that they will take on Southwest through Gary-Chicago. The only kind of service I can see developing at Gary-Chicago in the next few years is deep discount vacation oriented carriers such as operated by Allegiant tracking what has occurred at Chicago-Rockford.

    I rather wonder if a better choice of a NW Indiana airport to turn into a significant commercial player wouldn’t be Porter County Regional Airport. While this writes off the City of Chicago as a source of traffic it could draw from: Will County, IL; southern Lake County, IN; Porter County, IN; LaPorte County, IN; and Berrien County, MI.

  6. FG says:

    As a Chicagoan who went to school in Indiana, there is definitely a lot of bias in the rest of the state against NW Indiana (it’s “too un-hoosier” and the like – a lot of it race driven). Interestingly, the most solidly Republican county, Porter – which is certainly part of the region, went for Obama this election if I recall correctly. Hence the state won’t put much effort into the area.

    Unlike Milwaukee/Wisconsin, NW Indiana has the South Shore commuter train, probably even more on time than the Hiawatha.

    And a tidbit; R. Valentino was married in Crown Point, county seat of Lake County.

  7. Wad says:

    In one of my dream Midwest high-speed rail use cases, I highlighted the Hammond/Gary area for a major investment along with the trains.

    Since the area is on the way to a Chicago-Indianapolis-Louisville-Nashville-(maybe)Atlanta, Chicago-Detroit and Chicago-Cleveland network, there could be a new airport atop a station to replace Midway or a railcar assembly plant/heavy maintenance facility.

    This is one way Indiana could leverage Chicago’s role as a logistics nexus, if it hasn’t done so already. Note, though, that logistics is a poor job-creation strategy. Warehousing has low jobs-to-square-footage ratios, since modern warehouses are highly mechanized, and the work created is both low-value and itinerant (a lot of the jobs are temporary and filled through staffing agencies).

  8. James says:

    Steve,

    Chicagoland is seeing an increase of flooding of its own. Nothing as severe as New York of course, but there was a large flood two years ago. One of the largest public works projects ever, the Deep Tunnel, was started in the 70s to combat flooding in the region (it is after all a flood plain) but it may not be enough for the future.

    So I doubt Chicago could leverage itself as like the coasts only safer. Each region has its issues and aside from flooding there are also tornadoes.

  9. Chris Godlewski says:

    Aaron – a topic most people do not consider. You identified the realities of the interaction between the two quite well. There are so many things going on that help and actually hurt this area. I would like to add some thoughts from your intuitive comments.

    Chicagoland and NWI have two seperate regional comprehensive land use plans. If you read the NWI plan not once (maybe once) do they mention their relationship to Chicago. And when you read the comprehensive plan from the Chicago MPO not once do they mention SE Wisconsin or NWI. These areas are inherently connected but politically divided regions.

    Businesses do not recognize political boundaries because nearly 100K daily commuters come from NWI to Chicagoland. The reverse commute is not enough to mention. Yet, bus lines competing for federal funds run parallel to each other adjacent to the state line (CTA and Hammond bus lines) and never connect.

    NWI is ostricized from Indiana politics, as you mentioned, because they are Democrat within a predominatly republican state. I grew up in Chicago and really didn’t know Indiana or NW Indiana existed until I drove through it. Outside Chicago not much matters.

    I believe the theme here is business links the two and government seperates them.

    A more consistent regional approach makes for a stronger regional economy. I sure hope a catastrophe is not the change agent and collaboration makes the difference.

  10. Andrew Karas says:

    I agree with Aaron and Chris 100%. As a student, this doesn’t affect me in a direct way, but from an observer’s perspective, I’ve found it super frustrating that Chicago and “The Region” don’t interact politically. Chicago doesn’t pay lip-service to the other states, and NW Indiana has to listen to Mitch Daniels downstate.

    Mulling over the differences between the two economies, Northwest Indiana starts to remind me of a 3-world nation. I suppose if there were a governmental entity for the whole Tri-State area, it would monstrously hard for its leaders to explain to their constituents why one state is getting all the high-tech investments while the other state builds steel and refines oil–but I think the logic is sound so long as no one gets overtly obvious about it a la Larry Summers. (en.wikipedia.org/wiki/Summers_memo)

  11. Chris Barnett says:

    For the 16 years that Democrats Evan Bayh, Frank O’Bannon, and Joe Kernan were governor (1988-2004), NWI didn’t get any special favors either. So the issue isn’t Democrat NWI vs. Republican Rest-of-Indiana.

    This issue is NWI’s insularity and corruption, and the aforementioned 100,000 people who commute to Illinois every day. The “Rest of Indiana” sees a bunch of people who are tied to Chicago and don’t really see themselves as Indiana residents.

    And besides, they root for Da Bears. :)

  12. MetroCard says:

    Why do people try to make it seem like all of Indiana hates NWI and vice versa? As many times as I’ve read that online, I’ve never seen any real evidence talking to people where that’s actually the case.

    For example, there’s tons of people, especially minorities, who move back and forth between Lake County and the Indianapolis area. Many kids from that area attend Indianapolis schools and stay in the area after college, etc.

    One other thing: Lake and Marion counties were the only counties where Obama won by a landslide in 2012.

  13. Erik says:

    James,

    The Deep Tunnel is a result of Chicago’s combined sewer system funneling both storm and waste to filtration plants which are often unable to process the entirety of the incoming water during heavy storms… and resulting in a discharge of the system into the Chicago River and Lake Michigan, flooding them with untreated waste water. TARP was/is supposed to be a addition to the system’s overall capacity to allow it more time to process water during/after heavy storms.

    You would be hard pressed to find many areas in the Chicagoland area that are susceptible to flooding other than flood plains along the Des Plaines River, Fox River or the [natural] North Branch of the Chicago River that runs through the far NW side.

  14. Chris Barnett says:

    Metro, there’s no question that Lake and Marion Counties have more in common than not. Good urban policies benefit both counties.

    However, there is a distinct NWI attitude that comes across, and I have seen it in statewide meetings of different kinds.

    It’s a bit of “we have special needs and you treat us like the poor stepchild”, almost always with racial undertones. Yet other Indiana cities have brownfields, abandoned factories, minorities and poor people too. In particular, the racial makeup of Lake and Marion Counties is similar (55-65% non-Latino Caucasian; 25-27% African American; 5-10% Latino; 3-5% other), so the race card isn’t the right one to play.

    In particular, the mere presence of state government and state insitutions is seen by those in NWI (and the rest of the state) as an unconditional plus for Indy. But taxpayers in NWI aren’t covering the costs of 40-45% of the Indianapolis urban core real-estate being non-taxable (largely state government and institutions, plus statewide non-profits and regional medical centers), and of Indy commuters who pay their local income tax to the suburban jurisdictions instead of the city. Like most large capital cities, Indy is a net contributor to the rest of the state while everyone seems to assume the opposite.

    It’s also a little of, “we’ve got Chicago, we don’t need Indy”. Okay, but you can’t have a Chicago attitude and get very far with state government in Indy.

    And, frankly, the history of blatant and venal political corruption in Lake County turns other Hoosiers off. It echoes today: Lake County legislators are perceived as playing “what’s in it for us” when Marion County legislators are seeking relief or help at the Statehouse (usually to relieve some burdensome aspect of Unigov that wasn’t foreseen 40 years ago, or to provide some means for regional cooperation among Central Indiana counties).

    In sum, it’s almost as if the NWI people WANT to pit themselves against other metros in the state instead of building an urban/suburban coalition to counter the rural and small-town folks who seem to dominate the legislature.

  15. EJ says:

    Is it possible that NWI might just be better off getting a “divorce” from the rest of the state? Only throwing the question out for consumption, because as untenable as redrawing state lines or setting up some kind of bona fide regional-metro government might seem, if the states were to be drawn today, it’s tough to fathom that many would have their current boundaries. Chicago didn’t spill across three states when Indiana, Illinois and Wisconsin were founded.

  16. JM says:

    Since you brought up the BP refinery, there is an important point that it illustrates about the kinds of investment being made in NW Indiana—and its a mixed bag as to whether it represents a positive for the region.

    As you point out, enviros hate the BP expansion—not because it is making gasoline, but because of WHAT it is making gasoline out of. That expansion is to make the refinery into the biggest consumer of Canada’s ultra-heavy tar sands oil—even its apologists concede it is the most carbon-intensive petroleum on the planet. Chicagoland and the upper Great Lakes have been the epicenter of tar sands refining and billions have been spent to tie us ever tighter to that source, which is notoriously hard to refine due to its massively elevated sulfur content and various other chemical liabilities. Its bottom of the barrel stuff that is only profitable to refine when oil trades internationally above $60/barrel or more (something which seems certain for a while) since its extraction and refining are so much more intensive. Yes, our cars do still run on gas, but with climate legislation looming ever-more on the horizon and significantly cleaner domestic sources are transforming the energy landscape, is this a smart or safe investment for the region? Not likely. And the economic impacts of the immediate and significant price spikes at the pump that have occurred from various mishaps at the refinery and its pipeline network this summer have shown.

    As for electric car sales… Check history. Similar, “nobody is buying them” stories were out on the Prius early on and that is now at top-3 global brand. The Chevy Volt has actually outsold initial Prius offerings when they were first rolled out. New technology rarely takes hold immediately, that does not mean that the status quo is on solid footing. (Just look down the Lakeshore to Arcelor Mittal, where they are producing advanced automotive steel that is lightweight and of particular interest to electric vehicle producers…)

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