hile the term 'livable community' often evokes an image of pleasant neighborhoods, inviting parks and friendly people, a city's economic health is equally important to its livability. Without jobs, few residents will choose to remain in those neighborhoods. Without thriving businesses, the local government will be unlikely to have the tax base to maintain those parks. Continuing economic vitality is also an important part of a community's sustainability over the long term. A sustainable community must have an employment base that changes as the larger economy evolves; otherwise, public and private investments in buildings, infrastructure and other community assets are neglected as people and jobs move to other, newer areas. In this article, the major postwar cities of the United States are examined in terms of their economies and their efforts to retain or enhance economic vitality.
A Brief Background
This series on "Creating Livable 21st Century Cities" began with the premise that successful cities are those that are sustainable over time - communities that meet changing demands of residents and businesses and that are designed in a way that can be sustained with available resources. Five broad strategies for city sustainability were proposed in the first article of this series:
Although some of these strategies are expressed in terms of residents' choices, they are also relevant to the businesses in which these residents work, shop and invest. This series explores the application of these concepts in today's major American cities, identifying communities and programs that offer models other cities can follow as they strive to remain livable, sustainable and successful.
The first article in this series explained why the U.S. cities that have seen most of their growth since World War II - the 'major postwar cities' - offer the most relevant insights about the future of 21st century cities. In the
Throughout this series, information from U.S. Department of Commerce reports, other publications and the Internet sites of cities and related organizations form the basis for analysis. By using cities' web sites to research their programs and policies, the series uses the same tool a potential new resident or business would use to learn about a city. Whenever possible, information is presented for the major cities; when information is related to their metropolitan areas this is indicated.
Businesses and Economic Development in Major Cities
As noted, a thriving economy is a necessary part of a successful community because it provides jobs for area residents, offers them opportunities to purchase goods and services and contributes to the tax base that funds public services, facilities and amenities. A comparison of metropolitan areas of the 16 major postwar cities and the 14 older major cities in the U.S. provides a useful perspective on four notable ways in which their economies differ. Among the major postwar cities, incentives and other programs suggest approaches to develop economies that will thrive in the future.
When it comes to landing the headquarters of a large multi-national company, the metropolitan areas that saw most of their growth before 1940 have a significant edge. In 1999, 236 of the Fortune 500 companies had headquarters located in one of these top 30 metropolitan areas. The older metropolitan areas were home to 161 of these companies, with more than half (86) in the New York or Chicago areas. The younger metropolitan areas were the headquarters of only 75 Fortune 500 companies in that year. Of the four factors examined here, this is the only one that favors the older major cities.
Business Types and Sales
The 1997 Economic Census provides consistent data on the numbers of business establishments and sales receipts for various types of businesses. This information was analyzed to compare the regions centered on the 'younger' and 'older' major U.S. cities. The data used is for the "Combined Metropolitan Statistical Areas" (CMSA) in which the cities are located, except that these areas are subdivided into their constituent "Primary Metropolitan Statistical Areas" (PMSA) when more than one major city is included in a CMSA. Several key findings distinguish the two groups of cities.
First, the typical mix of business types differs from prewar to postwar cities. Postwar metropolitan areas have, on average, more business establishments involved in manufacturing, wholesale trade and other services than do the older metro areas. They have, on average, fewer business establishments involved in retail trade
Second, the business establishments in the postwar metropolitan areas have higher sales volumes than in the older metropolitan areas. The average volume of sales, receipts or shipments per establishment for the postwar metropolitan areas in 1997 was $2.96 million, while it was $2.23 million for the older metropolitan areas.
This is partly the result of the different mix of business types, since manufacturing and wholesale trade produce higher sales volumes than retail or professional services (for the postwar metropolitan areas, for example, wholesale trade businesses report an average of $10.6 million in sales, receipts or shipments per business establishment in 1997 compared to an average of $1.1 million for professional services business establishments in these same metro areas). However, even the businesses within certain of these high-value categories report higher sales in the newer metropolitan areas. Compared to the $10.6 million in sales for the average wholesale business in the postwar metropolitan areas, the average wholesale business in the older metropolitan areas reported $7.4 million in sales, receipts or shipments in 1997. These differences suggest that the characteristics of the companies as well as the metropolitan areas are resulting in economic activity with higher results in the major postwar communities.
Growth and Entrepreneurship
More high growth businesses and faster growing start-up companies also characterize the younger metropolitan areas. The National Commission on Entrepreneurship recently released a report titled "High-Growth Companies: Mapping America's Entrepreneurial Landscape." It used data for business growth from 1992 to 1997, grouped according to the Census Bureau's Labor Market Areas (LMA's), to examine the location and character of high growth businesses. This report uses a Growth Company Index (GCI) based on the growth rates of existing companies and the expansion of start-ups. The index ranges from 0 to 200, with 100 representing the average of all LMA's in the country. For the group of 30 cities used in this analysis of major American cities, the GCI's of the postwar cities are notably higher than for the older major cities. The top six cities, in terms of GCI, are all postwar cities. They are led by Phoenix, with a GCI of 197. Of all 30 cities, New York City has the lowest GCI at 56. On average, the postwar cities' market areas score a GCI of 164 compared to a GCI of 144 for the other major cities. While this index doesn't explain the reasons why growth has been faster in the newer major cities' regions, it does demonstrate their success in growing existing businesses and in providing a supportive environment for start-up companies.
Potential for Future Growth
With the recent slowdown of the national and global economies, it is difficult to predict the rate of future job growth for the next few years. However, three factors suggest that the younger metropolitan areas are likely to enjoy an advantage in terms of future growth. First, most of these areas are located in states that are projected to experience high job growth. The U.S. Department of Labor's Bureau of Labor Statistics prepares 10-year projections of job growth every two years. These projections are then used to develop projections for each state. The current set focuses on job growth from 1998 to 2008. Not surprisingly, states like California, Arizona and Florida are expected to see notable increases in employment. Eight of the postwar major cities are in states projected to have 20 percent or higher job growth during this period; only three of the older major cities are in such states.
Second, these cities and their regions continue to have significantly more population growth than the older cities. To the extent that consumer spending and the need for locally-provided services helps to support local economies, these growing regions should continue to create a higher demand for goods and services than the slower-growing regions.
Third, even in the current slowing economy, the postwar cities are reporting stronger growth than the older cities. The latest information from the Bureau of Labor Statistics, for the 12 months ending in July 2001, shows that the metropolitan areas of the postwar cities had an average increase in payroll employment of 1.5 percent while the metropolitan areas of the older cities saw an average increase of 0.8 percent. During this time period, San Jose saw a drop in employment of 0.9 percent, a reflection of the problems in high technology sector. The largest drop, however, was a 1.2 percent loss in Detroit! Interestingly, this report indicates that the average July 2001 unemployment rate is the same for the postwar and prewar metropolitan areas - 4.4 percent compared to a national average of 4.5 percent. This comparison is strongly affected by El Paso (8.4 percent unemployment) and Los Angeles (6.2 percent); most of the other major cities report unemployment rates from 3 percent to 6 percent.
Employment Centers for the 21st Century
Taken together, these factors suggest characteristics of the major postwar regions' economies that are different from those of older metropolitan areas. While there are fewer headquarters, the businesses that are located in these areas have higher sales per establishment than those in older areas. Also, there is a continuing expectation of growth of new and existing businesses and of the population that provides both employees and customers. But are these trends likely to continue? How sustainable are they? What are local governments and non-profit organizations doing to support their regions' economic well-being? Examples of programs underway in the 16 major postwar cities illustrate the application of city sustainability concepts discussed earlier.
1. Investing Public Funds for Economic Vitality
Public funds are an important source of investment for facilities that businesses must use. Continuing public investment is a necessity in all cities if the sewers, streets, parks and community centers are to continue serving residents and businesses. Many cities use their own resources to reinvest in developed neighborhoods, local business areas and downtowns. Bond programs, CDBG funding, EnterpriseZone, Empowerment Community and other programs provide resources to
Along with investment in infrastructure throughout a developed city, many of these major postwar cities are using investment in civic buildings and spaces to create new public gathering places and newly-desirable locations for nearby shops and restaurants. In El Paso, $50 million is being invested in public improvements at the Union Plaza downtown. This project will expand public facilities such as the convention center and create a new arts museum and arts festival plaza. It is explicitly presented by the city as a basis for new private investment. As the city's web site indicates: "It is the right time to invest in El Paso's Union Plaza. Tremendous investment opportunities now exist in the 14-block Union Plaza district." Phoenix, too, is considering expansion of its Civic Plaza and is studying options that will increase efficiencies in the operation of city and state agencies located in this area. This expansion may also include an "educational cluster" for local universities.
2. Attracting Businesses with Incentives
All these cities offer incentives to businesses that are locating or expanding within city limits. There are many examples of programs such as 'One Stop Shops' for business development and 'fast-tracking' of development review. A number of cities use tax abatement as an incentive; some also rebate certain fees for new development. San Antonio has perhaps succeeded at the public relations effort in this regard - their program is referred to as a 'tax phase-in' rather than as an abatement!
Such programs could be counter-productive in the long term if they result in demands on public services that exceed the revenue received. In most cities, though, the incentives are limited or targeted in ways that both reduce this long-term fiscal risk and support the viability of the local economic base over time. Abatements and incentives are generally focused on specific geographic areas that are particularly important for revitalization of the developed community or on the attraction of particular sorts of businesses. Columbus, Dallas, Memphis and El Paso are some of the cities that have a list of targeted industries for which incentives are available. These lists are not all the same, either. Dallas and Memphis both include biotechnology as one of their targeted industries, while Columbus includes manufacturing, distribution and technology, and El Paso uses a list of 24 industries that includes food processing and metal stamping as well as the more common computer and telecommunications industries. Since these targets are based on analysis of the existing economy and the community's strengths, they should mean that public incentives actually do encourage growth in industries that can be successful over time.
Tax increment funding (where the taxes paid on the increased property value in a defined district are invested within that district) is also used successfully to assist development in specific geographic areas. In California, state law provides for Redevelopment Agencies that can use such funds for many purposes, with a percentage reserved for housing. This tool has been quite effective in San Diego, San Jose and Los Angeles. In Texas and several other states, the Tax Increment Financing provisions are more limited. They have still been used to assist successful revitalization in locations such as Dallas' Uptown area. Houston currently has twenty tax increment reinvestment zones.
3. Addressing Labor Force Issues
For businesses to be sustainable, they must be able to obtain an adequate workforce with appropriate skills. For communities to be sustainable, residents must be able to find employment within a reasonable commute distance from their homes. These two tenets of community sustainability join in issues regarding labor force. Several of the major postwar cities tout their labor force as one of their assets for business location. The Greater Austin Chamber of Commerce, for example, lists a "well-educated work force" as the first reason why companies choose to locate in Austin. Even in the cities with strong
4. Partnering with the Private Sector
When it comes to economic vitality, private sector decisions are certainly the most critical. Many studies show that governmental incentives play a relatively small role in business locational decisions. They probably have even less impact on decisions related to market share, profitability and other business concerns. So it's no surprise that these major postwar cities frequently support economic development efforts through public-private partnerships. In most cities, partnerships with the local Chamber of Commerce are the primary vehicle for action on economic development. The City of Memphis worked with the Memphis Area Chamber of Commerce to develop a strategic economic development plan for the area. Jacksonville has taken such partnerships even further, with specific divisions of the Jacksonville Economic Development Commission that include a "Film and Television" arm, a "Research and Development Authority" and a "Sports and Entertainment Board." These entities, and similar organizations in other cities, are quasi-governmental and have
Other partnerships focus on particular real estate development or redevelopment projects. In Nashville, for example, the Nashville Urban Venture is the selected private developer for a 30-acre redevelopment project that is expected to result in 1,800 residential units, 400,000 square feet of retail and restaurant space, 800,000 square feet of office and one million square feet of parking. This redevelopment project is receiving city assistance in terms of infrastructure construction and tax increment financing but is being developed by the private sector. Memphis is currently seeking developer proposals for a project that will involve acquisition of the current Main Library's site and development of this 5+ acre property for private uses. In Memphis, the Memphis Incubator Systems, Inc. is a not-for-profit organization founded in 1999 to support start-up businesses. It operates an incubator for start-ups in technology areas identified in Memphis' list of targeted industries.
In many cities, partnerships occur with business associations in specific areas. The Gaslight Quarter Association in San Diego, the Sundance Square Downtown Entertainment District in Fort Worth and the Campus Partners for Community Redevelopment, Inc. in Columbus are a few of the many organizations representing businesses and educational institutions that focus on specific business areas within a city and provide improvements, events, marketing, maintenance and other resources to support business activity.
5. Maintaining Downtown
Downtowns are a unique part of cities. In most older major cities, the downtowns have been the center of commerce for one hundred years or more. In the newer major cities, downtowns were the original centers of their region but did not enjoy that prominent role for long before postwar urban dynamics began pushing businesses to outlying locations. Nevertheless, the downtowns in the major postwar cities receive particular attention because they still are the most intensely-developed areas, they retain competitive advantages for certain businesses, they often showcase the region's historic buildings and character, and they symbolize the city to its neighbors and the world. For these reasons, efforts to retain and reinvigorate downtown are emphasized in these major postwar cities.
Downtown Oklahoma City, Inc. states the goal of its efforts in this regard on its web site: "Our purpose is to increase the value of Downtown Oklahoma City for our clients - businesses, customers, investors and visitors." A wide range of activities is undertaken by such downtown organizations, which are typically private and often funded by downtown property owners. In most cases, the projects are jointly funded through public, private and non-profit sources. A few of these activities are noted below:
Common concerns are evident in most of these cities' downtown areas. The need for new retail, convenient parking, the perception of safety, creation of intown housing and pedestrian-friendly urban design are themes that postwar cities are addressing to enable their downtowns to be successful, not as the region's sole business center but as 24-hour places for living and working.
6. Identifying Special Business Areas
Along with downtowns, other older business areas face challenges if they are to remain viable. Strip commercial areas, former ethnic neighborhood shopping areas and 'miracle miles' of deserted automobile showrooms all are testimony to the market trends of the 1950's, 1960's and 1970's. Today these properties are not large enough or are not surrounded by residents of the demographic mix desired by new retailers. The long-term sustainability of these cities and their metropolitan areas requires that these areas be reutilized in some form. If they are not, they further speed the outward migration of residents from nearby neighborhoods who prefer new shopping areas to half-vacant shopping strips dominated by uses such as pawn shops and bingo parlors.
An interesting program to address such areas is underway in San Antonio. The "Neighborhood Commercial Revitalization Program" is designed to bring area stakeholders together to revitalize these commercial areas. The program is based on Partnership Projects led by area merchants, residents, business property owners and others. The city selects up to four Partnership Projects annually through a competitive application process. Selected projects receive $225,000 over three years for market research, planning and the implementation of projects that create jobs, improve infrastructure and enhance 'curb appeal.' Other technical assistance is also available and a NCR Networking Forum gives leaders from various areas a way to collaborate and share resources. A similar initiative, though at a smaller scale, is the Catalyst Project concept used by The Dallas Plan to assist in revitalization of local business areas in Dallas.
Charlotte's "City Within a City" initiative takes another approach to support for businesses in existing commercial areas. It includes a program that offers equity loans to cover up to 20 percent of a business' total loan funds if that company is in a designated center city location. The city's loan is deferred up to 10 years, until after bank loans are repaid.
7. Coordinating with Transportation Systems
Businesses do not want to locate in areas where their employees and customers cannot reach them easily. While the developed parts of cities often enjoy the advantages of a central location, this asset is negated if the roads are poorly maintained or highly congested. As noted in the previous article in this series, the major postwar cities must contend with repairing these
Light rail stations are successfully serving as focal points and catalysts for revitalization in cities including Dallas, San Jose and San Diego. Many of the development projects listed on the web site of San Diego's Center City Development Corporation are along the rail line. A notable recent success in Dallas is a new mixed-use project at Mockingbird Station, featuring loft housing, a new art film theater, restaurants and shops.
The major American cities that have seen dramatic growth in the last half-century face revitalization challenges if they are to remain sustainable and livable. At the same time, their unique economic characteristics give them (and their metropolitan areas) advantages that older major cities do not share. Broader economic trends give them the potential to attract and grow businesses that will
S. Walz is the Principal in Strategic Community Solutions (SCS)
and the Executive Director of The Dallas Plan, a non-profit organization
created to work with the city of Dallas and the Dallas community to
create and implement a long-range plan. Prior to forming SCS, Walz was
Director of Planning for Freilich, Leitner and Carlisle, managing planning
projects for clients nationwide. She has also served as the Manager
of Comprehensive Planning for the City of Austin and as Special Assistant
for Economic Development at the Boston Redevelopment Authority.
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