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Thursday, April 10th, 2014

Building a More Dynamic Cincinnati

This post originally appeared in the Cincinnati Enquirer on April 8, 2014.

Cincinnati arguably has the greatest collection of assets of any city its size in America. So why has the region been stagnant to slow-growing for so many decades?

When you look at the stunning collection of advantages and assets of Cincinnati – its geography; the amazing dense, historic architecture (great contemporary architecture, too); top-notch cultural institutions; a large corporate presence; and so many pieces of local culture and flavor of a type that has been homogenized away in most places – it’s an embarrassment of riches.

Yet since 1970, while the U.S. has grown by nearly 52 percent in population, the Cincinnati region grew by 26 percent, only half as fast. Other than Dayton, the other surrounding metro areas have also grown about twice as fast or more than Cincinnati. Cincinnati has lagged on jobs, too.

How is this? How can Cincinnati have the best stuff, but be a growth laggard?

Part of it is that all the assets in the world don’t help you if you don’t take advantage of them. Most of these are located in Cincinnati’s delightful urban core. But Cincinnati has to some extent abandoned that core in favor of low-grade sprawl.

The city of Cincinnati has lost a big chunk of population, and its regional share dropped from about 40 percent in 1950 to only 14 percent today. By contrast, New York City is still at 45 percent regional population share today. And while it’s a slow-growing region, too, the city of New York is at an all-time high in population and is booming in many ways, such as its tech and real estate industries.

Even Hamilton County has lost population as a whole, dropping by about 120,000 since 1970. By comparison, Indianapolis’s almost identically sized Marion County gained 135,000 during the same period – this in a place with far fewer obvious assets.

What’s more, unlike its fabulous core, Cincinnati’s sprawl isn’t even that good for the most part. So Cincinnati has chosen to fight its battle where it has few marketplace advantages instead of leveraging its unique and compelling assets.

This has proven a demographically, economically and financially unimpressive strategy. Instead, urban Cincinnati and Hamilton County should align available financial resources to make the most out of the amazing urban environment and assets that exist there.

Meanwhile, the suburbs aren’t going anywhere and will continue to grow, so they should seek to do so on a higher-quality pattern that will be financially sustainable long-term. The problem with sprawl is often less about the environmental impacts than the fact that as they age, older suburbs that weren’t very high-income to begin with become financial albatrosses as they fill up with dead malls, aging and less market-attractive homes, legacy costs and similar issues. And unlike the high-quality classic architecture of the core, they’ve as yet proven less adaptable over the long term.

The wonderful collection of assets Cincinnati has may also have bred complacency. Another name for an asset is “the stuff we did yesterday.” But what are we building for tomorrow? What is our generation’s contribution to the pot?

Cities like Columbus that started out with much less understood in their gut that they needed to go out and create some things. They were hungrier. Cincinnati needs to recover some of that hunger and fire in the belly that motivates other places that are keenly aware of what they lack and are fighting every day to improve.

Cincinnati has also been plagued with deep and counterproductive community divisions. This includes the East Side-West Side split, city vs. suburb, three states, tea partiers vs. liberals, racial divisions, etc. This makes it harder to get things done than it should be because there’s no civic consensus. The streetcar debate makes that very clear.

Cincinnati needs to find a way to heal these wounds and build a durable consensus while leaving room for appropriate debate.

A strategy that works with, not against, the unique qualities and competitive advantages of Cincinnati; a more aggressive, hungry civic attitude; and a way to bridge community divides are three of the things that will help Cincinnati to realize the sustainable growth and prosperity it should have in light of the fantastic place that it is and the incredible assets it has.

Thursday, March 20th, 2014

The Problem Is Not Enough Implementation, Not Too Few Ideas

My latest column is online in the March issue of Governing magazine. It’s called “How to Harvest Good Ideas” and it focuses on a theme I’ve written about before, namely that the real problem in cities isn’t a lack of good ideas, but a lack of an ability to select and implement good ideas. Thus the focus we tend to have on ideation can be misplaced. Here’s an excerpt:

Indeed, if you look at the cities that have achieved notice for their accomplishments, it’s usually as much or more an implementation story than an idea story. Most of the transportation changes implemented by New York City Mayor Michael Bloomberg and his Department of Transportation Commissioner Janette Sadik-Khan were not original ideas. The real lesson to take away from New York is less the ideas than the implementation strategy. It’s about a mayor who provided air cover and empowerment to his department chief. And about a commissioner who used very low-cost pilot projects, often done with little more than cans of paint, to create working demonstration projects without getting bogged down in endless planning studies and red tape.

True, some cities have better ideas than others. But the bigger divide is between can-do and can’t-do cities, or perhaps more realistically, cities in which its easier versus harder to get things done.

Friday, February 21st, 2014

The Great Urban Divide, Michigan Edition

I’ve said many times that it is predominately larger metropolitan regions of 1-1.5 million people or larger that are best positioned to succeed in the global economy. This is in effect the minimum viable scale to compete. These cities have bigger talent pools, thicker labor markets, the right infrastructure (e.g., major airports) and amenities, bigger local markets, more specialized suppliers, and more entrepreneurial ferment. Smaller places that don’t have a unique asset (such as a major university) are going to struggle.

We see that on display again in Michigan, where Battle Creek based Kellogg’s is opening an operations center in Grand Rapids. This will employ 300-600 people, including some transferred from the headquarters. As the company put it:

Kellogg CEO John Bryant told The Grand Rapids Press/MLive they chose Grand Rapids for the new center after looking at nine possible locations around the U.S. as part of a new corporate restructuring initiative dubbed “Project K.”

Bryant said the company chose Grand Rapids because 40 other corporations have created similar service centers in the area, creating a labor pool from which Kellogg hopes to draw.

“We’re very excited about the Grand Rapids location. There’s a good population base for this sort of activity,” Bryant said.

Leaders in Battle Creek are angry about the company choosing to open in nearby Grand Rapids:

“This was a unilateral action by the Kellogg Company,” [former Battle Creek mayor and U.S. congressman Dr. Joe] Schwarz said Monday, “blindside, if you will. And that’s not the way people in Battle Creek, especially those that have been here a long time and worked with Kellogg on so many issues like myself, that simply is not the type of behavior we’ve come to expect from the company.”

At the time, Jim Hettinger was CEO of Battle Creek Unlimited. In a column for the Battle Creek Enquirer, Hettinger expressed his frustration over Kellogg’s announcement, saying the city has continually gone to great lengths to accommodate the company’s needs.

I understand the frustration, but at the end of the day, this is the reality of the modern world we live in. We see similar business decisions every day. Kellogg’s is in Battle Creek for historical reasons. There’s no way the company would ever choose to locate there today. The changing demands of the global marketplace create a need for skills that are easier to find in or lure to a place like Grand Rapids (metro population one million) than Battle Creek (metro population 135,000). That’s reality.

Note here that cost is simply not the issue. Both Grand Rapids and Battle Creek are lower cost locations. It’s clearly about being in a place that has better scale to serve the needs of a business serving upwards of 600 white collar employees.

This divergence understandably fuels resentment and bitterness within states, as I noted in a recent column in Governing magazine. I frequently find that to locals it’s particularly galling when a company does something like this within the state boundaries. Had Kellogg’s opened in Austin, Texas, I strongly suspect Battle Creek wouldn’t be nearly so bitter. I’ve long noted the same thing in Indiana, where smaller towns and cities would far rather see an out of state company buy their local bank or whatever than have an Indianapolis company come in. (Though I’ve also noticed this has changed for the better in the last 20 years). The reality is these jobs could have left the state entirely. Had Grand Rapids not been there, they probably would have.

This is one reason I have pounded the table for more expanded regional thinking by the likes of Grand Rapids. It’s not an easy problem, but if they can’t demonstrate that there’s a win-win in here somewhere for regional metros like Kalamazoo and Battle Creek, resentment will become entrenched. This can be difficult because the answers aren’t obvious and places like Grand Rapids – which itself is of marginal scale and what’s more not on the trade routes in the way a place like Columbus, Ohio is – are pedaling hard to just to make sure they themselves can make it. But longer term I think it’s imperative.

In the meantime, it’s important for state leaders to understand and respond to these realities. If they don’t, they will only drive business out of the state completely, just like effectively Indiana’s entire banking industry got gobbled up with little to show for it.

PS: One exception I’ve noted to this rule: Chicago. I didn’t seem to hear the same anger from Decatur over ADM that we see here. I think in part it’s because they understand Chicago is just a far different place than them. It’s such a unique city that losing a small executive headquarters doesn’t even seem like genuine poaching. Plus the entire leadership of the state is Chicago-centric, and and their top priority is building up global city Chicago.

Wednesday, February 12th, 2014

Saving East Cleveland

Rust Wire pointed me at this video from mid-2012 called “Saving East Cleveland” that was created by residents of that community. Angie Schmitt was struck by the lack of outward blame residents have, and so was I. Before getting to the film, a few of my observations and takeaways.

First, as noted there is a singular lack of blaming of outside forces for the decline of East Cleveland. While Angie highlights the sprawl narrative, I think there’s a more important element at play: race. Clearly race relations played a huge role in how East Cleveland ended up in its current condition. Yet this video shows a remarkable lack of animus about that, even where it might be legitimate. I found this a profound rebuke of those who stereotype black America as walking around looking to play the race card.

I see the attitude and approach of the people in the video as grounded in a clear-eyed, realistic understanding of the fact that no one is coming to save East Cleveland (a separate municipality, not the east side of Cleveland). Though it appears to be not that far from the university, medical and cultural district of Cleveland, this isn’t a place that seems likely to attract the attention of local billionaires or regional bigwigs or state government. All those actors are focused on saving Cleveland itself, and as is commonly the case, only select districts of that. If there are any solutions for East Cleveland, they are going to have to come from inside the city.

There’s a standard Rust Belt narrative of loss. But what we see here, unlike with white flight suburbanites, is a keen sense of the loss of social capital as embodied by their grandparents’ generation and the values it held. They understand the pernicious effect this loss of social capital has had on their community. (Incidentally, we witnessing the exact same dynamic of loss playing out in many parts of white America today – I even see it in my own family).

What then is left to start turning around East Cleveland? Only one thing: self-improvement. I see the film maker as trying to recreate that lost social capital by calling people to accept responsibility for their lives and their community. The lists of accomplishments recited before the interviewees says it clearly: these are successful role models from East Cleveland. It is possible conduct yourself well and succeed as a man or woman here. This is what we need to be as a community. Step it up.

In a sense, while a tougher road, neighborhood improvement through internal development may be more beneficial for the residents. How is neighborhood “improvement” generally implemented in America today? By substituting new residents for the old (gentrification). This might improve real estate values, but I’m not sure it improves the lives of those who originally lived in the area, unless they managed to reap windfall real estate gains.

Instead of gentrifying the neighborhood, the film maker says we should in effect gentrify the people. This is evident in how they view as successes – not traitors – those from East Cleveland who made it in life but ended up leaving.

This documentary is 40 minutes so you may want to watch it on TV. Unlike the typical film of Detroit or wherever filmed by (often out of town) upscale whites, this is a film by and for the black residents of East Cleveland. Definitely worth a watch. If the video doesn’t display for you, click here.

Pete Saunders also posted a take on it.

Thursday, February 6th, 2014

A Road Privatization Plan That Makes Sense

I’m a little late to the party on this one, but wanted to chime in on Long Grove, Illinois’ proposal to privatize residential streets by vacating them and turning them over the subdivision owners to maintain, either via a homeowners associations or special service districts.

This has been presented in some quarters as the cost of sprawl coming due, but I wouldn’t spin it that way. Long Grove is an affluent community and doesn’t even levy a property tax at all. Clearly the village has a the fiscal wherewithal to afford to maintain these roads.

Rather, I see this as intelligently recognizing the fact that the roads are already private. Many subdivision streets effectively serve no public purpose to anyone outside the development in question. Why should they then be paid for out of general taxes anymore than private driveways are? Indeed, the village actually wised up long ago and decided to no longer accept subdivision streets into its inventory. As the linked article above from the Chicago Tribune put it:

Local leaders first realized in the 1970s that to pay for maintaining roads without a property tax, something had to give, said Long Grove Village Manager David Lothspeich. After that, the board allowed public streets in new subdivisions only if they were main roads, and eventually entire subdivisions sprang up without a single public road, he said.

The article also notes that private roads are what allows gated communities, something that actually has proven a selling point. I didn’t see in the article whether or not the developments in question would be able to erect gates on their newly privatized streets, but why not?

So much of the traditional sprawl development is based on backloaded subsidies for things like street maintenance. By establishing up front that these de facto private roads are in fact actually private, and forcing the cost of maintenance, snow removal, etc. onto the private beneficiaries, we can start getting close to the true market cost of these houses.

Tuesday, January 21st, 2014

Improving Chicago Public Transit Idea #3: Invest In What’s Already Here by Natasha Julius

[ Here's the third installment in Natasha Julius' series on Chicago transit. You can also check out part one and part two - Aaron. ]

There is a set of train tracks running in front of the Cook County Court building along 26th. Remnants of an elevated embankment cut across the city’s midsection south of Pershing. In Chicago and the near suburbs, abandoned rail lines form an elaborate web of disintegrating infrastructure all around us. The potential of these resources to galvanize our transportation system is enormous; wherever possible, they should be given over for public use.

The reclamation of rail rights-of-way is not a new idea. The CTA’s Orange Line and Metra’s North Central were built using existing freight tracks. Planned extensions of the Orange, Red and Yellow lines would use similar strategies. Existing corridors within the city could alleviate the paucity of decentralized connections. They could add tremendous capacity to our mass transit systems without diminishing capacity on surface roads.

Determining which existing lines are eligible for redevelopment is a daunting task. Often abandoned tracks are mixed in with others that are still in use. Trying to sort out which tracks are owned by whom quickly leads you into a black hole of railroad consolidation history. The suggestions given below involve only rights-of-way that have been acknowledged as abandoned in the public record, or those that show visible signs of advanced deterioration. There may be many more; all should be pursued.

The Mid-City Transitway
Running north-south along Kenton Avenue for much of the length of the city, this abandoned branch of the Chicago Belt Railway was for many years associated with one of the more infamous transportation plans in recent memory: the Crosstown Expressway. In the 1960s, the Crosstown was proposed as a bypass route, an alternative to the Dan Ryan that avoided downtown traffic. The only trouble was the eight-lane expressway would’ve required the destruction of some 30,000 homes in countless neighborhoods. (Click here for a map of the proposed Crosstown route.) With the wounds of the Dan Ryan construction still bleeding, the people of Chicago rose up and handed Richard the First a rare defeat.

Since the Crosstown was cancelled in 1979, the available embankment has not been redeveloped. It popped up in the City’s plans as recently as 2007, when Richard the Second commissioned a study to determine the feasibility of several alternatives including a new L line and a truck bypass. To date, nothing has been done to move this corridor closer to public use.

The Mid-City is unique among available rights of way for its sheer length. Few other rail lines extend as far north, and none are as poker-straight. The location of the line, just east of Cicero Avenue, makes connecting with existing CTA and Metra lines much easier – many of these lines have Cicero stations that could be linked. The Mid-City would also offer access to both Midway and O’Hare.

While the proposed layout of the Mid-City extends as far north as the Blue Line at Montrose, an adjacent abandoned right-of-way could carry the Mid-City all the way up to the Yellow Line, giving north suburban residents a new mass transit route to Chicago’s airports.


View Mid-city Transitway Northern Extension in a larger map

The limiting factor of the Mid-City is the width of the available embankment, thought to be somewhere between 50 and 70 feet. Even if it is as narrow as 50 feet, it would allow ample room for a true Bus Rapid Transit line. If the embankment permits, this could be combined with a recreational path that could serve as a bookend with the Lakefront Path. This type of redevelopment could make the Mid-City a welcome addition to the surrounding communities.

Please note, the original Crosstown Expressway plan called for the road to make a sharp left turn at 75th Street and connect with the Dan Ryan. The existing rail corridor along 75th is still in use (including, in portions, by Metra). As such, it may not be possible to extend a BRT line along that portion.

The Campbell Corridor
The tracks that run along 26th Street in Little Village are leftover from a complex distribution system that once operated along the Chicago River. Many of these shorter spurs fed into a north-south rail artery located half a block west of Western Avenue. At its northern end, the line merges with freight and Metra tracks close to Fulton. To the south, it joins a massive freight route that runs all the way to Blue Island. Part of this right-of-way is used by the Orange Line, from Pershing to roughly 49th Street.


View Abandoned right of way along Campbell in a larger map

A new CTA line using this corridor would link Metra’s Milwaukee District Line with the CTA’s Green (Lake Street Branch) Blue, Pink and Orange Lines. Moving the current California Green Line Station a couple of blocks east could spur the creation of a new mini-hub. The line would serve the aforementioned Cook County Court building, as well as Douglas Park and the new wall-to-wall IB high school in Back of the Yards. It would link communities that are currently divided by the river and the Eisenhower and Stevenson expressways.

At around 55th it becomes unclear whether any of the existing tracks have been abandoned. If, however, an available right-of-way extends as far south as 63rd it would make the dream of a Circle Line feasible. The freight lines along Western pass tantalizingly close to the current terminus of the Green Line at 63rd and Ashland.

The Stockyards and Kenwood Lines
As previously noted, Chicago’s bike path system has grown considerably in recent years. Some parts of the city, however, remain stubbornly unfriendly to cyclists. One such fallow patch stretches from 33rd Street to 47th and from Halsted to King Drive. It encompasses parts of Bronzeville and Bridgeport, as well as US Cellular Field. In the middle of this expanse runs an embankment that used to hold the Kenwood and Stock Yards branches of the South Side Elevated.


View Kenwood and Stock Yards Embankment in a larger map

Both of these branches were abandoned in the 1950s. The surviving infrastructure is riddled with problems. Most of the bridges east of the Dan Ryan were removed, so the lines are not contiguous. West of Stewart, the right-of-way broadens and it’s unclear which tracks (if any) are in use. The area is heavily industrial, so it’s entirely possible this track system is still in use from freight.

All of this said, the two abandoned spurs offer the potential for a recreational path and park system that could put the 606 to shame. The Kenwood embankment is now lushly forested, creating a unique natural environment. It offers easy access to the Lakefront Path via Oakwood and crosses a major north-south bike lane route at King Drive. A trail-to-rail hub at Indiana would give easy access to IIT and the Loop. The line traverses Stateway Park, where a spur turns north toward Bronzeville. The suggested western terminus at Halsted is close to the historic Union Stock Yard gate at Exchange and Peoria. There is a line of track that runs right by the gate, although it’s again unclear whether this is in use.

This project would be massive. It would also be unprecedented in its capacity to link disparate communities. This is an area that was torn apart by the construction of the Dan Ryan; a recreational path like this would be a refreshing and innovative way to reconnect former neighbors.

Right now, Chicago is an elaborate tomb for the once-dominant railroad industry. Unused tracks and abandoned embankments litter neighborhoods throughout the region. It’s time to resurrect these features in service of the people who live here.

This post originally appeared in the Beachwood Reporter on October 16, 2013..

Thursday, January 16th, 2014

How Globalization Isolates Struggling Cities

My latest piece is in the January issue of Governing Magazine. It’s called “How Globalization Isolates Struggling Cities. In effect, this is a companion piece to my recent post on metro-centric economic development strategies. Here’s an excerpt:

In the age of globalization, cities and states would rather build bridges to the world than to the town next door. Some of this is simply the way the economy works. As Richard Longworth, senior fellow at the Chicago Council on Global Affairs, wrote in his book Caught in the Middle: America’s Heartland in the Age of Globalism, “Chicago probably deals more, daily, with Frankfurt or Tokyo than it does with Indianapolis.”

He went on to identify the problem at hand, noting that “Globalization is beginning to isolate cities from their hinterlands: The hinterlands see this trend and are disinclined to do anything to speed it up. They perceive that most of these people—globalization’s winners—have never spent 30 seconds worrying about globalization’s losers.”

This is the two-tier society we see developing nationally playing out at the local level. It creates a tug of war at the state policy level, and it tears apart the whole notion that we are a commonwealth. It creates states that are, as Longworth put it, “hives of warring interests.”

Sunday, January 12th, 2014

Why State Economic Development Strategies Should Be Metro-Centric

Globalization, technology, productivity improvements, and the resulting restructuring of the world economy have led to fundamental changes that have destroyed the old paradigms of doing business. Whether these changes are on the whole good or bad, or who or what is responsible for bringing them into being, they simply are. Most cities, regions, and US states have extremely limited leverage in this marketplace and thus to a great extent are market takers more than market makers. They have to adapt to new realities, but a lack of willingness to face up to the truth, combined with geo-political conditions, mean this has seldom been done.

Three of those new realities are:

1. The primacy of metropolitan regions as economic units, and the associated requirement of minimum competitive scale. It is mostly major metropolitan areas, those with 1-1.5 million or more people, that have best adapted to the new economy. Outside of the sparsely populated Great Plains, smaller areas have tended to struggle unless they have a unique asset such as a major state university. Even the worst performing large metros like Detroit and Cleveland have a lot of economic strength and assets behind them (e.g., the Cleveland Clinic) while smaller places like Youngstown and Flint have also gotten pounded yet have far fewer reasons for optimism. Many new economy industries require more skills than the old. People with these skills are most attracted to bigger cities where there are dense labor markets and enough scale to support items ranging from a major airport to amenities that are needed to compete.

2. States are not singular economic units. This follows straightforwardly from the first point. As a mix of various sized urban and rural areas, regions of states have widely varying degrees of economic success and potential for the future. Their policy needs are radically different so the one size fit all nature of government rules make state policy a difficult instrument to get right. Additionally, many major metropolitan areas that are economic units cross state borders.

3. Many communities may never come back, and many laid-off workers may never be employed again. Realistically, many smaller post-industrial cities are unlikely to ever again by economically dynamic no matter what we do. And lost in the debate over the n-th extension of emergency unemployment benefits is the painful reality that for some workers, especially older workers laid off from manufacturing jobs, there’s no realistic prospect of employment at more than near minimum wage if that. As Richard Longworth put it in Caught in the Middle, “The dirty little secret of Midwest manufacturing is that many workers are high school dropouts, uneducated, some virtually illiterate. They could build refrigerators, sure. But they are totally unqualified for any job other than the ones they just lost.” This doesn’t even get to the big drug problems in many of these places. This isn’t everybody, but there are too many people who fall into that bucket.

I want to explore these truths and potential state policy responses using the case study of Indiana. An article in last week’s Indianapolis Business Journal sets the stage. Called “State lags city with science, tech jobs” it notes how metropolitan Indianapolis has been booming when it comes to so-called STEM jobs (Science, Technology, Engineering, Math). Its growth rate ranked 9th in the country in study of large metro areas. However, the rest of Indiana has lagged badly:

Indiana for more than a decade has blown away the national average when it comes to adding high-tech jobs. But outside the Indianapolis metro area, there isn’t much cause for celebration.

Careers in science, technology, engineering and math—typically referred to as STEM fields—have surged in growth compared to other careers in Marion and Hamilton counties. It’s a boon for economic development, considering the workers earn average wages almost twice as high as all others, and employers sorely need the skills. Dozens of initiatives focus on building STEM jobs in the state.

A recent report ranked the Indianapolis-Carmel metro area ninth in the country in STEM jobs growth since the tech bubble burst in 2001. But while the metro area has grown, the rest of Indiana has barely budged from the early 2000s, an IBJ analysis of U.S. Bureau of Labor Statistics found.

Indianapolis grew its STEM job base by 39% since 2001 while the rest of the state grew by only 10% (only 6% if you exclude healthcare jobs). Much of the state actually lost STEM jobs.

This divergence between metropolitan Indianapolis (along with those smaller regions blessed with a unique asset like Bloomington (Indiana University), Lafayette (Purdue University) and Columbus (Cummins Engine)) and the rest of the state is a well-worn story by now. Here are a few baseline statistics that tell the tale.


Item Metro Indianapolis Rest of Indiana
Population Growth (2000-2012) 15.9% 4.1%
Job Growth (2000-2012) 5.9% -7.2%
GDP Per Capita (2012) $50,981 $34,076
College Degree Attainment (2012) 32.1% 20.1%

Additionally, there does appear to be something of a brain drain phenomenon, only it’s not brains leaving the state, it’s people with degrees moving from outstate Indiana to Indianapolis. From 2000-2010 a net of about 51,000 moved from elsewhere in Indiana to metro Indianapolis. As Mark Schill put it in the IBJ:

“Indianapolis is somewhat of a sponge city for the whole region,” said Mark Schill, vice president of research at Praxis Strategy Group, an economic development consultant in North Dakota.

The situation in Indiana, Schill said, is common throughout the United States: States with one large city typically see their engineers, scientists and other high-tech workers flock to the urban areas from smaller towns.

Even I find it very surprising that of my high school classmates with college degrees, half of them live in Indianapolis – this from a tiny rural school along the Ohio River in far Southern Indiana near Louisville, KY.

What has Indiana’s policy response been to this to date? I would suggest that the response has been to a) adjust statewide policy levers to do everything possible to reflate the economy of the “rest of Indiana” while b) making subtle tweaks attempt to rebalance economic growth away from Indianapolis.

On the statewide policy levers, the state government has moved to imposed a one size fits all, least common denominator approach to services. The state centralized many functions in a recent tax reform. It also has aggressively downsized government, which now has the fewest employees since the 1970s. Tax caps, a comparative lack of home rule powers, and an aggressive state Department of Local Government Finance have combined to severely curtail local spending as well. Gov. Pence took office seeking to cut the state’s income tax rate by 10% (he got 5%), and now wants to eliminate the personal property tax on business. Indiana also passed right to work legislation.

I call this “the best house on a bad block strategy.” I think Mitch Daniels looked around at Illinois, Ohio, and Michigan and said, “I know how to beat these guys.” Indiana is not as business friendly as places like Texas or Tennessee, but the idea was to position itself to capture a disproportionate share of inbound Midwest investment by being the cheapest. (I’ll get to Pence later).

The subtle tweaks have been income redistribution from metro Indianapolis (documented by the Indiana Fiscal Policy Institute) and using the above techniques and others to apply the brakes to efforts by metro Indy to further improve its quality of life advantage over many other parts of the state (see my column in Governing magazine for more). One obvious example is a recent move by the Indiana University School of Medicine to build full four year regional medical school campuses and residency programs around the state with the explicit aim of keeping students local instead of having them come to Indianapolis for medical training.

What there’s been next to nothing of is any sense of metropolitan level or even regional thinking. The state does administer programs on a regional level, but the strategy is not regionally oriented and the administrative borders don’t even line up. Here are the boundaries of the various workforce development boards:

There’s a semi-metropolitan overlay, but as I’ve long noted places like Region 6 are economic decline regions, not economic growth regions. Here’s how the Indiana Economic Development Corp. sees the world:

These are not just agglomerations of the workforce districts, there are numerous differences between them. The point is that clearly the organization is driven by administrative convenience and the political need for field offices, not a metro-centric view of the world or strategy.

Add it all up and it appears that Indiana has decided to fight against all three new realities above rather than adapting to them. It rejects metro-centricity, imposes a uniform policy set, and is oriented towards trying to reflate the most struggling communities. I don’t think this was necessarily a conscious decision, but ultimately that’s what it amounts to.

When you fight the tape, you shouldn’t expect great results and clearly they haven’t been stellar. Since 2000, Indiana comfortably outperformed perennial losers Michigan and Ohio on job growth (well, less job declines), but trailed Kentucky, Wisconsin, Minnesota, Iowa, and Missouri. But notably, Indiana only outpaced Illinois by a couple percentage points. That’s a state with higher income taxes (and that actually raised them) that’s nearly bankrupt and where the previous two governors ended up in prison. Yet Indiana’s job performance is very similar. What’s more, Hoosier per capita incomes have been in free fall versus the national average, likely because it has only become more attractive to low wage employers.

Fiscal discipline, low taxes, and business friendly regulations are important. But they aren’t the only pages in the book. Workforce quality counts for a lot, and this has been Indiana’s Achilles heel. (My dad, who used to run an Indiana stone quarry, had trouble finding workers with a high school diploma who could pass a drug test and would show up on time every day – hardly tough requirements one would think). Also aligning with, not against market forces is key.

I will sketch out a somewhat different approach. Firstly, regarding the chronically unemployed, clearly they cannot be written off or ignored. However, I see this as largely a federal issue. We need to come to terms with the reality that America now has a population of some million who will have extreme difficulty finding employment in the new economy (see: latest jobs report). We’ve shifted about two million into disability rolls, but clearly we’ve to date mostly been pretending that things are going to re-normalize.

For Indiana, the temptation can be to reorient the entire economy to attract ultra low-wage employers, then cut benefits so that people are forced to take the jobs. I’ve personally heard Indiana businessmen bemoaning the state’s unemployment benefits that mean workers won’t take the jobs their company has open – jobs paying $9/hr. Possibly the 250,000 or so chronically unemployed Hoosiers may be technically put back to work through such a scheme – eventually. But it would come at the cost of impoverishing the entire state. Creating a state of $9/hr jobs is not making a home for human flourishing, it’s building a plantation.

Instead of creating a subsistence economy, the focus should instead be on creating the best wage economy possible, one that offers upward mobility, for the most people possible, and using redistribution for the chronically unemployed. You may say this is welfare – and you’re right. But I would submit to you that the state is already in effect a gigantic welfare engine. In addition to direct benefits, the taxation and education systems are redistributionist, and the state’s entire economic policy, transport policy, etc. are targeted at left-behind areas (i.e., welfare). Even corrections is in a sense warehousing the mostly poor at ruinous expense. So Indiana is already a massive welfare state; we are just arguing about what the best form is. I think sending checks is much better than distorting the entire economy in order to employ a small minority at $9/hr jobs – but that’s just me. Again, we are in uncharted territory as a country and this is ultimately going to require a national response, even if it’s just swelling the disability rolls even more. I do believe people deserve the dignity of a job, but we have to deal with the unfortunate realities of our new world order.

With that in mind, the right strategy would be metro-centric, focusing on building on the competitively advantaged areas of the state – what Drew Klacik has called place-based cluster – and competitively advantaged middle class or better paying industries.

Contrary to some of the stats above, this is not purely an Indianapolis story. Indiana has a number of areas that are well-positioned to compete. Here’s a map with key metro regions highlighted:

This may look superficially like the maps above, but it is explicitly oriented around metro-centric thinking. Metro Indy has been doing reasonably well as noted. But Bloomington, Lafayette, and Columbus (sort of small satellite metros to Indy) have also done very well. In fact, all three actually outperformed Indy on STEM job growth.

Additionally, three other large, competitively advantaged metro areas take in Indiana territory: Chicago, Cincinnati, and Louisville. These are all, like Indy, places with the scale and talent concentrations to win. True, none of the Indiana counties that are part of those metros is in the favored quarter. But they still have plenty of opportunities. I’ve written about Northwest Indiana before, for example, which should do well if it gets its act together.

This covers a broad swath of the state from the Northwest to the Southeast. It comes as no surprise to me that Honda chose to locate its plant half way between Indianapolis and Cincinnati, for example.

The state should align its resources, policies, and investments to enable these metro regions to thrive. This doesn’t mean jacking up tax rates. Indiana should retain its competitively advantaged tax structure. But it should mean no further erosion in Indiana’s already parsimonious services. The state is already well-positioned fiscally, and in a situation with diminishing marginal returns to further contraction.

Next, empower localities and regions to better themselves in accordance with their own strategies. This means an end to one size fits all, least common denominator thinking. These regions need to be let out from under the thumb of the General Assembly. That means more, not less flexibility for localities. Places like Indianapolis, Bloomington, and Lafayette would dearly love to undertake further self-improvement initiatives, but the state thinks that’s a bad idea. (I believe this is part of the subtle re-balancing attempt I mentioned).

It also means using the state’s power to encourage metro and extended region thinking. For example, last year within a few months of each other the mayors of Indianapolis, Anderson, and Muncie all made overseas trade trips – separately and to different places. That’s nuts. The state should be encouraging them to do more joint development.

This also means recognizing the symbiotic relationship that exists between the core and periphery in the extended Central Indiana region, clearly the state’s most important. The outlying smaller cities, towns, and rural areas watch Indianapolis TV stations, largely cheer for its sports teams, get taken to its hospitals for trauma or specialist care, fly out of its airport, etc. Metro Indianapolis and its leadership have also basically created and funded much of the state’s economic development efforts (e.g., Biocrossroads) and many community development initiatives (the Lilly Endowment). Many statewide organizations are in effect Indianapolis ones that do double duty in serving the state. For example, the Indiana Historical Society. (There is no Indianapolis Historical Society).

On the other side of the equation, Indianapolis would not have the Colts and a lot of other things without the heft added from the outer rings out counties that are customers for these amenities. It benefits massively from that, particularly since it’s a marginal scale city. One of the biggest differences between Indy and Louisville is that Indy was fortunate enough to have a highly populated ring of counties within an hour’s drive.

So in addition to aligning economic development strategies around metros, and freeing localities to pursue differentiated strategies, the state should encourage the next ring or two of counties that are in the sphere of influence of major metros to align with their nearest larger neighbor.

Contrary to popular belief, this is a win-win. When I was in Warsaw, Indiana, people were concerned that many highly paid employees of the local orthopedics companies lived in Ft. Wayne. From a local perspective, that’s understandable and obviously they want to be competitive for that talent and should be all means go for it. On the other hand, what if Ft. Wayne wasn’t there for those people to live in? Would those orthopedics companies be able to recruit the talent they need to stay located in small town Indiana?

It’s similar for other places. Michael Hicks, and economist at Ball State in Muncie, said, “Almost all our local economic policies target business investment and masquerade as job creation efforts. We abate taxes, apply TIFs and woo businesses all over the state, but then the employees who receive middle-class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville.” Maybe Muncie isn’t completely happy about this, understandably. But would they have been able to recruit those plants at all (and the associated taxes they pay and the jobs for anybody who does stay local) if higher paid workers didn’t have the option to live in suburban Noblesville? Would the labor force be there?

I saw a similar dynamic in Columbus. Younger workers recruited by Cummins Engine chose to live in Greenwood (near south suburban Indy). Columbus wants to keep upgrading itself to be more attractive – a good idea. But the ability to reverse commute from Indy is an advantage for them.

Louisville, Kentucky has one of the highest rates of exurban commuting the country because so many Hoosiers in rural communities drive in for good paying work.

This is the sort of thinking and planning that needs to be going on. Realistically, most of these small industrial cities and rural areas are not positioned to go it alone and they shouldn’t be supported by the state in attempting to do so. They need to a align with a winning team.

There are two groups of places that require special attention. One is the mid-sized metro regions of Ft. Wayne, Evansville, and South Bend-Elkhart. These places are too far from larger metros and aren’t large enough themselves to have fully competitive economies. No surprise two of the three lost STEM jobs. Evansville has done better recently on the backs of Toyota, but has a vast rural hinterland it cannot carry with its small size. The region has done ok of late, but it has also received gigantic subsidies in the form of multiple massive highway investments, and now a massive coal gasification plant subsidy. I don’t believe this is sustainable. These places need special assistance from the state to devise and implement strategies.

The other grouping consists of rural and small industrial areas that are too far outside the orbit of a major metro to effectively align with it. This would includes places like Richmond or Blackford County. They might get lucky and land a major plant, but realistically they are going to require state aid for some time to maintain critical services.

For the last two groups especially, there also needs to be a commitment by the state’s top brain hubs – Indy and the two university towns – to applying their intellectual and other resources to the difficult problem at hand. Part of that involves helping them be the best place of their genre that they can. While cities are competitively advantaged today, not everybody wants to live in one. So there is still an addressable market, if not as large, for other places.

Put it together and here’s the map that needs to be changed. It’s percentage change in jobs, 2000-2012:

Pretty depressing. Urban core counties had some losses, but suburban Indy, Chicago, and Cincy did decently (Louisville’s less well), plus Bloomington area, Lafayette, and Columbus. You see also the strong performance of Southwest Indiana which is fantastic, but the sustainability of which I think is in question. Wages are higher in metro areas too, by the way. Here’s the average weekly wage in 2012, which shows most of the state’s metros doing comparatively well:

In short, I suggest:

- Retain lean fiscal structure but limit further contractions
- Goal is to build middle class or better economy, not bottom feeding
- Align economic development efforts to metro areas, particularly larger, competitively advantages locations. Align capital investment in this direction as well.
- Greater local autonomy to pursue differentiated strategies for the variegated areas of the state
- Special attention/help to strategically disadvantaged communities, but not entire state policy directed to servicing their needs.
- Utilization of transfers for the chronically unemployed pending a federal answer, but again, not redirection of state policy to attract $9/hr jobs.

This requires a lot of fleshing out to be sure, but I think is broadly the direction.

Back to Gov. Mike Pence, would he be on board with this? He’s Tea Party friendly to be sure and interested in fiscal contraction. But he’s not a one-trick pony. He’s actually taken some interesting steps in this regard. He is subsidizing non-stop flights from Indianapolis to San Francisco for the benefit of the local tech community. He also wants to establish another life sciences research institute in Indy. And he’s talked about more regionally focused economic development efforts. It’s a welcome start. I think he groks the situation more than people might credit him for. Keep in mind that he did not establish the state’s current approach, which arguably even pre-dated Mitch Daniels, and he has to deal with political realities. And if as they say only Nixon could go to China, then although a reorienting of strategy is not about writing big checks, still perhaps only someone with conservative bona fides like Pence can push the state towards a metro-centric rethink.

Thursday, January 9th, 2014

What Is a City For?

Joel Kotkin recently produced a brief report for a Singapore agency called “What Is a City For?” that asks some important questions that are too often not considered when thinking about our cities. Whether or not you agree with Kotkin’s answer, the questions are worth pondering and being able to answer. The lead paragraphs set the stage:

What is a city for? In this urban age, it’s a question of crucial importance but one not often asked. Long ago, Aristotle reminded us that the city was a place where people came to live, and they remained there in order to live better, “a city comes into being for the sake of life, but exists for the sake of living well”

However, what does “living well” mean? Is it about working 24/7? Is it about consuming amenities and collecting the most unique experiences? Is the city a way to reduce the impact of human beings on the environment? Is it to position the polis — the city — as an engine in the world economy, even if at the expense of the quality of life, most particularly for families?

The last question gets to Kotkin’s answer. He clearly sees the city as a locale that should be, above all, a place to produce and nurture future generations. As he puts it later in the report, “My answer is a city exists for its people, and to nurture families that grow, identify and share a common space. The issue, then, is how to do this while staying competitive in the global economy.”

One does not have to be pining away for the 1950s to recognize that, despite the decline in traditional nuclear and extended family household structures generally, urban cores – and the urbanism agenda – have become unbalanced in favor of singles. There has probably been more urbanist ink spilled over so-called “micro-apartments” than about playgrounds for children, for example.

In part this is because in the wave of suburbanization the swept the post-war world, urban cores lost out in the battle for families to the suburbs. Especially as urban school districts declined, these areas were no longer very attractive to those with school-aged children who have the means to leave. Hence the focus on a differentiated demographic: singles, gays (particularly in the era prior to gay marriage, adoption, and child-rearing), and empty-nesters.

The cities that were most successful at this are those which are held up today as urban exemplars. And they have the smallest percentage of their population under the age of 18 in the country. Of the 61 municipalities in 2010 that had 300,000 or more people, it should come as no surprise that San Francisco ranked dead last in percentage of children at 13.4%. The bottom ten is heavily populated by an urbanist who’s who, including Seattle, Washington, Boston, Portland, and Minneapolis.

Rank Municipality 2010
1 San Francisco city, CA 107,524 (13.4%)
2 Seattle city, WA 93,513 (15.4%)
3 Pittsburgh city, PA 49,799 (16.3%)
4 Washington city, DC 100,815 (16.8%)
5 Boston city, MA 103,710 (16.8%)
6 Urban Honolulu CDP, HI 58,727 (17.4%)
7 Miami city, FL 73,446 (18.4%)
8 Portland city, OR 111,523 (19.1%)
9 Atlanta city, GA 81,410 (19.4%)
10 Minneapolis city, MN 77,204 (20.2%)

With places like Manhattan and Washington dominated by singles and people living alone, it should come as no surprise that their lifestyle needs take center stage in defining what it is cities should be about.

So far, so good. I’ve often argued myself that cities should strengthen their strategic differentiation versus the suburbs. There’s no necessary reason why cities have to be aimed at children. However, to de facto write off families with kids is to acknowledge that the city exists as a niche. And make no mistake, that’s what’s happening. I just looked through the first five pages of articles on Atlantic Cities, for example, and found only a passing reference to births in a post about the US population estimate and a paragraph on the Dasani article as relating to children. And the Dasani piece, a story on a homeless child in New York, is revealing. My impression is that a large percentage of the urban stories that are about children involve hand-wringing over the need for social service spending. Notwithstanding the real need for social services, a life of public housing, food stamps, and Medicaid is not aspirational. The fact that so many children in the city are in fact those whose parents are too poor to get out and who need extensive public support just to survive is not something to be celebrated.

If we expect cities to be part of the answer to the problem of climate change, the financial unsustainability of sprawl, or anything else, then it has to be a place where children can be raised to thrive in the world. One doesn’t need to share Kotkin’s vision to see that. This doesn’t mean necessarily junking the urbanist agenda, but it does mean building a bigger tent and not overly obsessing the needs of niche market segments.

Families are but one dimension of the city however. I think too often we, meaning me included, jump straight into things like how to create a global city economy without taking a step back first to ask exactly what it is the city is for. Kotkin has given his answer. It would be interesting to hear yours in the comments. I must confess that I don’t have an easy elevator pitch style answer myself, so this is something for me to ponder too.

Tuesday, December 10th, 2013

Southern California’s Road Back by Joel Kotkin

[ Believe it or not, metro LA has fewer jobs today than it did in 1990, making it the only metro in America's top ten that can make that "boast." Today Joel Kotkin shares some of his thoughts on rebuilding - Aaron. ]

If the prospects for the United States remain relatively bright – despite two failed administrations – how about Southern California? Once a region that epitomized our country’s promise, the area still maintains enormous competitive advantages, if it ever gathers the wits to take advantage of them.

We are going to have to play catch-up. I have been doing regional rankings on such things as jobs, opportunities and family-friendliness for publications such as Forbes and the Daily Beast. In most of the surveys, Los Angeles-Orange County does very poorly, often even worse than much-maligned Riverside and San Bernardino. For example, in a list looking at “aspirational cities” – that is places to move to for better opportunities – L.A.-Orange County ranked dead last, scoring well below average in everything from unemployment to job creation, congestion and housing costs relative to incomes.

Yet, Southern California possesses unique advantages that include, but don’t end at, our still-formidable climatic and scenic advantages. The region is home to the country’s strongest ethnic economy, a still-potent industrial-technological complex and the largest culture industry in North America, if not the world.

In identifying these assets, we have to understand what we are not: Silicon Valley-San Francisco, or New York, where a relative cadre of the ultrarich, fueled by tech IPOs or Wall Street can sustain the local economy. Unlike the Bay Area, in particular, our economy must accommodate a much larger proportion of poorly educated people – almost a quarter of our adult population lacks a high school degree. This means our economy has to provide opportunities for a broader range of skills.

Nor are we a corporate center such as New York, Houston, Dallas or Chicago. We remain fundamentally a hub for small and ethnic businesses, home to a vast cadre of independent craftspeople and skilled workers, many of whom work for themselves. In fact, our region – L.A.-Orange and Riverside-San Bernardino – boasts the highest percentage of self-employed people of any major metropolitan area in the country, well ahead of the Bay Area, New York and Chicago.

Policy from Washington has not been favorable to this grass-roots economy. The “free money for the rich” policy of the Bernanke Federal Reserve has proven a huge boom to stock-jobbers and venture firms but has not done much to increase capital for small-scale firms. Yet it is to these small firms – dispersed, highly diverse and stubbornly individualistic – that remain our key long-term asset, and they need to become the primary focus on regional policy-makers.

Ethnic Networks

Immigration has slowed in recent years but the decades-long surge of migration, largely from Asia and Mexico, has transformed the area into one of the most diverse in the world. More to the point, Southern California has what one can call diversity in depth, that is, huge concentrations of key immigrant populations – Korean, Chinese, Mexican, Salvadoran, Filipino, Israeli, Russian – that are as large or larger than anywhere outside the respective homelands. Foreigners also account for many of our richest people, with five of 11 of L.A.’s wealthiest being born abroad.

These networks are critical in a place lacking a strong corporate presence. Our international connections come largely as the result of both the ethnic communities as well as our status as the largest port center in North America, which creates a market for everything from assembly of foreign-made parts to trade finance and real estate investment. Southern California may be a bit of a desert when it comes to big money-center banks, but it’s home to scores of ethnic banks, mainly Korean and Chinese, but also those serving Israeli, Armenian and other groups.

For the immigrants, what appeals about Southern California is that we offer a diverse, and dispersed, array of single-family neighborhoods. Both national and local data finds immigrants increasingly flocking to suburbs. Places like the San Gabriel Valley’s 626 area, Cerritos, Westminster, Garden Grove, Fullerton and, more recently, Irvine, have expanded the region’s geography of ethnic enclaves.

These enclaves drive whole economies, such as Mexicans in the wholesale produce industry or the development of electronics assembly and other trade-related industry by migrants largely from Taiwan. Global ties are critical here. Korean-Americans started largely in ethnic middleman businesses, but have been moving upscale, as their children acquire education. They, in turn, have helped attract investment from South Korea’s rising global corporations, including a new $200 million headquarters for Hyundai in Fountain Valley, as well as a $1 billion, 73-story new tower being built by Korean Air in downtown Los Angeles.

Tech Industrial Base

During the Cold War, Southern California sported one of the largest concentrations of scientists and engineers in the world. The end of the Cold War, at the beginning of the 1990s, severely reduced the region’s technical workforce, a process further accelerated by the movement out of the region of such large aerospace firms as Lockheed and Northrop. The region has roughly 300,000 fewer manufacturing jobs than it had a decade ago, largely due to losses in aerospace as well as in the garment industry.

Yet, despite the decades-long erosion, Southern California still enjoys the largest engineering workforce – some 70,000 people – in the country. It also graduates the most new engineers, although the vast majority of them appear to leave for greener pastures. One looming problem: a paucity of venture capital, where the region lags behind not just the Bay Area, but also San Diego and New York. This can be seen in the relative dearth of high-profile start-ups, particularly in fields like social media, now dominated by the Bay Area.

But the process of recovery in Southern California does not require imitating Silicon Valley. Instead we need to leverage our existing talent base – and recent graduates – and focus on the region’s traditional strength in the application of technology. A recent analysis of manufacturing by the economic modeling firm EMSI found strong growth in some very promising sectors, including the manufacturing of surgical and medical equipment, space vehicles and a wide array of food processing, an industry tied closely to the immigrant networks.

Cultural Complex

For most Americans, and even more so among foreigners, the image of Southern California is shaped by its cultural exports, not only in film and television but in fashion and design. This third sector epitomizes the uniqueness of the region, and provides an economic allure that can withstand both the generally poor business climate and the incentives offered by other regions.

After a period of some stagnation, Hollywood again is increasing employment. Roughly 130,000 people work in film-related industries in Los Angeles, which is now headed back to levels last seen a decade earlier but still well below the 146,000 jobs that existed in 1999.

At the same time, the sportswear and jeans business in Los Angeles, and the surfwear industry in Orange County, remain national leaders. Overall, the area’s fashion industry has retained a skilled production base – over twice that of rival New York’s – and has been aided, in part, by access to Hollywood, lower rents and labor costs than in New York.

Taken together, these sectors – ethnic business, sophisticated manufacturing and culture – could provide the basis for a renaissance in the local economy. The smaller firms in these fields, in particular, need a friendlier business climate, a more evolved skills-training program from local schools and a better-maintained infrastructure. More than anything, though, they require an understanding on the part of both government and business that their success remains the best means to reverse decades of relative decline.

Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

This piece originally appeared at The Orange County Register.

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