Tuesday, March 11th, 2014
[ Today Chuck Eckenstahler looks back at the unfulfilled promises of Benton Harbor, MI being declared metropolitan – Aaron. ]
It’s called the “Benton Harbor Rule”, a hard fought change spearheaded by now Congressman Upton and local leaders to obtain metropolitan status in 1980.
Back in the mid-1970′s, Berrien County Michigan, local governments and the Twin Cities Chamber of Commerce (predecessor to Cornerstone Chamber Services) identified the value of being recognized as “being metropolitan rather than rural”.
They identified the immediate opportunity to access as much as $1.8 million (1970’s dollars) of new federal and state funding that could only be obtained by “being metropolitan” for road improvements, bus transit, health and other social services. They estimated the designation would yield a $12-14 million dollar impact to the local economy.
To access these potential funds, they undertook a multi-year effort to change Federal Office of Management and Budget policy prohibiting Berrien County from ever being considered metropolitan.
Successful lobbing changed the rules for the 1980 Census creating, 9 new Metropolitan Areas like Benton Harbor-St. Joseph lacking a central city of 25,000 population in a concentrated urban area having a population of 50,000 or more, in a county having a population of 100,000 or more. This change modified the minimum sized “single city” criteria for determination of a “demographic dominate central city” requirement for federal metropolitan designation purposes.
Economic Development Advantages Identified
In the 1970’s being “metropolitan” meant more than increased state and federal money, according to the supporters. “Metropolitan” meant growth – increasing population and prosperity.
Business seeking to locate understood “metropolitan” to be a better place for new investment – both industry needing workers and retailers needing customers for success.
On the contrary, being a rural area meant the area didn’t quite make the grade for certain businesses especially the rapid growth of emerging fast food franchises and location of regional shopping malls.
The recruitment of these new businesses was a major goal of Chamber of Commerce visionaries who sponsored a nonprofit owned industrial park as a place for new industry to locate and create jobs. Back then there were no regional shopping malls and residents did a lot of their shopping in Kalamazoo, South Bend and Michigan City. It was believed the “metropolitan” designation would contribute to the redevelopment of Benton Harbor and the growth of communities throughout the county”.
Anyway, it just didn’t make sense that the home of several national firms such as, Auto Specialties, Leco Corporation, Tyler Refrigeration, Clark Equipment and Whirlpool would not reside in a growing metropolitan location.
Measuring the Impact of Metropolitan Designation
Today many wonder – was this successful? Did the change in federal policy truly make a difference?
Three decades later one measurement – population growth – can be used to gauge whether the legacy of this effort achieved results.
The adjoining table contains data for 8 of the 9 new MSA’s designated in 1980 due to the “Benton Harbor Rule”. The other has been merged into a consolidated MSA, a newer federal designation describing larger population centers, eliminating decade-to-decade data comparison.
This data reveals population of the Benton Harbor/St. Joseph MSA did not grow to the same extent as other comparative MSA’s created in 1980 – being a population loss of 8.4% compared to a 35.2% growth in population over the past three decades.
Where the average total comparative metropolitan growth rate in each decade ranged between 7-17%, the Benton Harbor St. Joseph MSA lost population twice between 1980 and 1990 and again between 2000 and 2010. The MSA only had marginal 0.7% population growth between 1980 and 1990.
Obviously, the legacy of the authors of the Benton Harbor Rule, raises questions – why and what happened to the well intentioned efforts to stimulate growth.
The logical questions based on the data include – Why didn’t the Benton Harbor-St. Joseph MSA achieve similar growth? Shouldn’t the population have grown in a similar fashion as the other MSA’s – at least at the average rate? What social, political and economic impediments arose to limit population growth?
Many credit the demise of the auto industry, the off-shoring of manufacturing jobs and globalization of business as impediment to population growth. Others mention Michigan’s unfavorable business climate as a cause.
There certainly some truth in each statement. However closer to home, the more appropriate question might be – are there local impediments that hampered population growth?
Economic Geography and Realities of “Place”
The following offers a few thoughts on social and political barriers that might cause the lack of population growth:
The “Friday Night” social identity of Southwestern Michigan where small town high school sports define the community is a barrier to multi-community collaboration and cooperation. It limits the ability of local government and customer trade areas to form and strengthen economic clusters of businesses to maintain economic marketability necessary to sustain small local business that once supplied the small town community shopping experience.
Paralysis of Political Geography
In place of economic consideration which should inspire cooperation there is paralysis, the inability to shed “political boundary binders” that maintain the historic political geography that may, in some cases limit the scale of economics necessary for retail business sustainability and the delivery efficient government services.
Cognitive “Place” Realism
Without a doubt, economic markets of Berrien County today are different compared to 1975 when efforts to create a demographic dominate metropolitan central city composed of smaller individual communities was first initiated. Individual mental mapping of the actual area of influence of the Niles and Benton Harbor – St. Joseph shopping areas shows customers pay little attention in which local government the actual shopping is done. This mental cognitive mapping discloses three major retail markets, Benton Harbor – St. Joseph, Niles – connected to South Bend and Harbor Country – connected to Michigan City.
This pattern creates a rather isolated St. Joseph – Benton Harbor metropolitan market area surrounded by two (or three) market areas influenced by more dominate regional competitors having a population approximating 70,000 people with a somewhat lackluster future growth trend.
Ethnic and Cultural Diversity Polarization
Modern metropolitan community development theory has identified “social capital” as a key to economic prosperity in a global market. This is especially important for international businesses who recruit globally for management talent. Academic researchers have documented communities who richly embrace ethnic, cultural, religion and gender differences that increase social interaction among a wide spectrum of people tend to have increased population growth resulting in greater economic prosperity.
Academic research also discloses communities with “less tolerance for differences” lag behind both in community population growth and employment growth by firms serving global markets; leading to the question of adequacy of inclusionary and tolerance tendency of the metropolitan area.
Questionable Externally Communicated Metropolitan Identity
A metropolitan area identity, or its “good name”, is formed in people’s minds by repeated exposure – being the accumulated knowledge they acquire from varied sources (news media, marketing publicity, testimonials, etc.) and their personal experiences resulting in a positive, negative or neutral image. To often this image is one that leaders prefer not to address or address by issuing cheerleader statements or other auditory claims promising a personal experience that cannot be kept. A positive metropolitan identity and image is a message designed to attract attention and then follow with support services that fulfill the expected experiences.
The decision to visit or invest in a “place” is based on faith and trust because “customers” are purchasing an intangible personal asset. The logical question for any metropolitan area is – Do we offer a “good name” identity and image?
“Metropolitan” As a Determinant of Future Growth
Post-recession public policy has reinstated the importance of “metropolitan areas” in Michigan’s economic development policy.
Academics and political leaders extol the virtue of economic advantages of Michigan’s metropolitan areas. They are assembling new legislation and administrative policy to direct public and private investment to Michigan’s “core community” metropolitan areas.
From a public policy perspective this makes logical sense. Young people gravitate to metropolitan areas due to job opportunities metropolitan areas generate, the greatest number of new business formations occur in metropolitan areas, metropolitan areas tend to have higher per household incomes for their residents, and metropolitan areas attract higher value real estate investment that enhance the local government tax base.
A recent Brookings Institution analysis confirms this statement, where their research documents that in 47 of the 50 states, metropolitan areas generate the majority of the states’ gross economic output. They report in 2009, the St. Joseph – Benton Harbor Metropolitan area accounted for $5,620,000,000 (1.5%) of Michigan’s gross economic output (See: Brookings Institution Metropolitan Policy Program – Metropolitan Area and the Next Economy and New Economy State Profiles).
Brookings advocates a “metro-led vision” for the future since they have “distinct assets and market strength to grow quality jobs and provide statewide prosperity”. They also note that metropolitan areas have:
1. In 30 states (including Michigan) the most innovative and educated workers,
3. Generate the majority of internationally exported goods and services, and
4. Host 89% of the working-aged people with post-secondary degrees.
All in all, Michigan’s strategy to define and focus government economic development attention to metropolitan “core communities” areas having greatest economic development impact is a reasonable and prudent “statewide” public policy. Michigan’s future hinges on performance of its metropolitan urban “core communities” hosting innovative firms, educated workers and critical infrastructure.
The Importance of “Geographic Place Identity”
Michigan’s newly forming metropolitan focused economic development public policy direction again draws attention on the importance of “metropolitan” and its impact on future growth of the Niles – Benton Harbor – St. Joseph Metropolitan Statistical Area.
Future community growth success is about understanding residents and, in the case of southwestern Michigan, to a lesser extent, seasonal residents and the occasional visitor. Population growth, especially well-educated workers is paramount to participation in the next wave of U.S. economic growth.
They say history repeats itself and again today – the term “metropolitan” once again communicates a sense of vitality and future prosperity.
In the eyes of the world a “metropolitan geographic brand identifier trumps a rural territorial identifier”.
This post originally appeared in Chuck Eckenstahler’s blog on February 27, 2014.
Tuesday, January 24th, 2012
[ Chuck Eckenstahler, semi-retired in 2008 from a 35-year career as an active full-time municipal planner, economic developer and real estate consultant, sent me an email with some thoughts in response to my post about Detroit building its way back to prosperity. This led me to his blog and the post below with some thoughts about the trends that will drive planning and economic development in 2012. He graciously gave me permission to repost it here – Aaron. ]
Last December I posted 25 Future Trends That Will Impact Economic Development. This was my attempt to identify key trends that would shape the daily concerns of planners and economic developers in 2011.
With the help of my colleague Craig Hullinger, we circulated the “write-up” to a wide audience of active and retired planners, economic development practitioners, city managers and academics.
We got a lot of feedback that began conversations leading to the conclusion that job creation and household wealth would be the major “drivers” of government inspired planning and economic development in 2011.
I believe the wisdom of these folks were correct and as we close out 2011 the need for job growth and increasing household income remain a top priority for the successful future economic revitalization of the global, national and local economies.
Below are my thoughts on the leading trends that will impact planning and economic developers in 2012.
1. Land Use Plans to focus on abandoned land and buildings not “greenfields”.
With the change in consumer spending patterns – reduced disposable income and increased reliance on internet purchases – plus the backlog of vacant home and commercial properties in (or soon will be) subject to foreclosure, there will be a reduce demand for new construction directing planners and economic development attention on reuse of buildings. It’s the same for vacant building sites currently serviced by municipal infrastructure.
The notion of incentivizing new development will be discouraged in favor of planning and economic development strategies that focus on reuse and redeployment of vacant land and buildings.
2. Financial support for planning to be reduced.
Federal and State budget reductions are inevitable. With planning and economic development activities being discretionary “non-mandated” government activities, planning and economic development program support will be targeted for budget reduction, probably to a greater extend than mandated government programs.
Planners and economic developers will be asked to “do more with less” and to seek non-governmental funding support from private contributions, foundations and fees for services provided. The planner and economic developer job description will now include a new component titled “fund raising”.
3. Economic feasibility will be required of all new initiatives.
Since the early 1970’s with Florida’s comprehensive state/local growth management act, planners were expected to include a degree of economic feasibility into the planning process, especially when implementation of plans included reliance upon federal and state funding sources. However, rarely has economic feasibility or benefit/cost analysis been applied consistently and in non-technical easily understood meaningful ways.
With heightened demand for sparse governmental funds, plans and economic development strategies requiring funding commitments, especially those by local governments, will be subject to intense scrutiny and most likely only funded upon sound economic benefit/cost analysis.
The era of planning and economic development strategies that “sound good” but rely upon undocumented funding sources is unacceptable today to citizens and elected officials alike.
Planners and economic developers will be expected to fully justify funding requests by easily communicated economic analyses relying on projected benefits for use of government funds.
4. Job creation “tops” all other concerns.
Gallup pollster Jim Clifton (see The Coming Jobs War) calculates that global unemployment is over 50% and globally there is a 1.8 billion job shortfall. He opines that jobs……jobs……and jobs will be the most important government mission in the future.
He further opines the US must have a 7% GDP growth rate to retain its global presence and decrease US unemployment; almost doubling the most generous US GDP growth rate being discussed in the media today.
For planners and economic developers, this is unhappy news drawing attention to heightened future demand for state and local action to create jobs.
For planners and economic developers, the increased global competition for jobs, pulse a likely anemic US GDP growth rate in 2012 will create intense pressure for programs and action that create new jobs.
5. Service area geographic sizing to become the major planning criteria.
In the Midwest, our local government geographic sizing was created by the Northwest treaties in the late 1800’s when the principal means of communication was a horseback ride to personally speak with someone. With internet and wireless communications today, we almost instantaneously communicate “with anyone – anywhere”. We have the ability to instantaneously bundle-up work assignments and ship them anywhere around the world to be completed and returned.
However, many government services remain modeled on the notion they must be provided on the basis of “a one-day horse ride” from home.
While all states allow governments to share services and even consolidate for greater financial efficiencies, it’s a rare occurrence.
Historic political isolationism based on the loss of political control permeates the inability to explore changes to service area geography that may reduce financial operating costs for services provided.
As governmental revenues become more strained and where taxpayers will not increase government revenue, planners and economic developers will be called upon to engage in municipal service consolidation conversations to exact efficiencies that stabilize or reduce government service costs.
6. Utility maintenance “trumps” new expansions.
While at the state and national level we call for more infrastructure funding for “big project” roads and bridges, back home at the local level most communities maintain underutilized water, sewer, storm drain and subdivision streets built with the notion that new development, most often new residential home owners, would pay user fees and local taxes to operate and maintain the local infrastructure.
In the absence of new construction requiring new utility connections plus the abundance of demolitions of no-longer needed homes and commercial buildings, in some communities the actual number of utility “paying” connections is being reduced or “at best” remaining stable. Most utilities were originally sized to service more users anticipated by 10-20 years of future growth but in actuality, now and maybe for considerable time into the future, will remain underutilized.
The cost of operations and long-term maintenance in almost all cases was based on revenues obtained from anticipated future new connections. With operation and maintenance cost increasing and revenue possibly decreasing, or at best stable, local government budgets in the future will focus on maintenance of the existing infrastructure rather than funding new expansion.
Planners and economic developers will be pressured by budget constraints to seek development projects that increase the number of utility connections allowing the amortization of operation and maintenance cost over a larger number of utility bill payers.
7. Tax payers demanded greater efficiencies to guide new growth.
I think everyone will agree that tax payers are overwhelmingly against tax increases and expect greater efficiencies from government to “hold the line” on cost increases resulting in the need for additional tax revenue.
With this in mind, it will be more difficult to undertake new programs requiring additional tax revenue from tax payers. Likewise, tax abatements or deferral of tax revenues as economic development incentives will also be subject to questioning and higher degree scrutiny.
Planners and economic developers will be discouraged from advocating projects that require forgiveness of tax revenues and encouraged to seek projects that have short-termed positive tax revenue income, especially for local governments that rely upon real estate taxes and/or local captured sales taxes to fund local government operations.
8. Federal and State paralysis over local funding freezes local government decision making.
The “we can’t do that now, because we don’t know what’s going to happen” governmental decision making paralysis will continue into 2012. Government funding uncertainty, due to uncertain federal, state budgets, coupled with uncertainty about local real estate and sales tax revenue has already become the mantra of government decision making today.
Many economists forecast several more years of this uncertainty, making the budget making job most difficult for elected officials. This uncertainty already results in postponement and cancellation of projects that in “better times” would contribute to an economic development stimulus to the local economy.
Recognizing that uncertainty will continue into 2012, planners and economic developers will find slim support for projects that require funding beyond approved budgets and greater pressure from elected and appointed officials to seek external project funding sources.
9. Local municipal insolvency and bankruptcy strikes fear deciding long-term funding.
Over the past 3-years there have been 49 municipal bankruptcies, according to the nationally leading municipal bankruptcy law firm of Chapman & Cutler. The most publicized being Jefferson County Alabama’s $3 billion revenue bond sewer fund driven bankruptcy – the largest in history. Media reports predict the potential for other bankruptcies is having a major impact on the $2.9 trillion municipal bond investment market, where 2/3 are revenue bonds – those viewed as “safe investments” by investors because they are “backed” by a utility revenue stream that is likely to continue even in the worst of economic times.
With questions about the future of federal, state and local revenues, today most government officials are a bit leery of committing to long-term projects, especially those that commingle sources of funds from multiple government programs and revenue sources based on new growth.
In 2012, planners and economic developers will be saddled with questions about municipal solvency both in efforts to package financing for necessary municipal infrastructure investments and to assure new businesses desiring to locate that the community is solvent and resistant to “surprise” tax increases that might occur due to unrecognized financial needs.
10. Municipal financing will become more expensive cancelling certain projects.
Because of government bankruptcy, unfunded state and local government obligations, reduced federal/state/local revenue, non-expendable operating budgets, and increased operating expenses, investors are looking at municipal financing risk a bit differently today and will continue to do so in the future. Where real or perceived investment risk increases so does the price, the amount of interest government must pay. Even purchasing insurance that guarantees payment in case of default gives little comfort to the investor, as leading insurers are being called into question about their ability to fund required payments in case of an economic crisis of substantial proportion.
All in all, this new uncertainty means that cost to borrow funds by states and local governments will be more closely evaluated and cost more.
For the planner and economic developer in 2012, the ability of governments, especially local governments to raise capital for projects will be more difficult and lessen the aggressiveness towards undertaking long-term financed projects.
As we closeout 2011, we give thanks – thanks that we made it through. It was a difficult year where many economic changes reshaped the role planners and economic developers play at the federal, state and local government levels.
The “crystal ball” today is no different….cloudy at best!
Again in 2012, the economy and jobs will be subject of every conversation.
Being an election year it will be on every newscast.
Our challenges as planners and economic developers focus on shaping the future.
Our charge today is – What can we do in 2012, with the resources at hand to invest in the future?
This post originally appeared in Chuck Eckenstahler’s Blog on December 4, 2011.