Managing Capital Resources for Central City Revitalization

Fritz W. Wagner, Timothy E. Joder, Anthony J. Mumphrey, Jr.

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9780815332138
• eBook ISBN:
  9781317944485
• Topic: Politics & International Relations
• Subtopic: Urban Planning & Landscaping
• Index: Politics & International Relations

First Published in 2000. This book and its companion volume, Human Capital Investment fo r Central City Revitalization, are the products of a two-year endeavor by the National Center for the Revitalization of Central Cities. The National Center is a consortium of academic institutions that analyzes critical problems facing America's central cities, evaluates strategies to address those problems, and recommends policy alternatives.

CHAPTER 1

Managing Capital Resources

ROBERT W. BECKER AND ROBERT A. COLLINS

Since the end of World War II, the United States has invested significant physical and financial resources to revitalize central cities. Some federal efforts at revitalization, such as urban renewal, have been piecemeal and haphazard; others, such as the urban development action grant program, have been qualified successes. Since 1980, however, the federal government has significantly diminished its commitment to America’s central cities.

Urban mayors and state governments made up for reduced federal funding by offering tax incentives (especially tax-increment finance districts and tax abatements) to attract industry. Through such incentives, many central cities—particularly between 1982 and 1988—rehabilitated major portions of their downtowns with new construction and new investments in commercial, office, and retail uses. The economic recession that began in 1989 and continued through 1992, however, reduced the number and type of tax and other locational incentives that local governments could offer to attract industry.

In contrast to well-known locational incentives, a few locally based revitalization experiments have been all but overlooked in the literature. This is possibly because these initiatives have not been formally supported by the federal government. In this book, the contributors examine how central cities manage their physical and fiscal resources (or capital assets) so that the central city continues to be a center of business and residential activity.

Each chapter in this text shows how central cities meet the goals of economic growth and development in a postfederal environment. As federal and state resources devoted to central cities have declined, and as traditional financing mechanisms prove counterproductive to growth and development, municipalities have designed strategies and programs to manage their capital resources better. These local strategies and programs include the reuse of temporary obsolete abandoned derelict structures; the establishment of business improvement districts; and the construction of sports, convention, and entertainment venues. Better management of capital resources leads to economic growth and development and thus to urban revitalization. Moreover, the strategies presented here reveal that better management of capital resources raises the standard of living for central city residents.

In this introductory chapter, we define terms, give an overview of the urban development literature, and provide an organizational structure for the remainder of the book.

DEFINITION OF TERMS

Managing capital resources for central city revitalization: What do these terms mean? Many textbooks on urban revitalization do not explicitly give operational definitions. The authors of these texts assume that the reader ascribes the same meaning as they do to technical terms. Although reader and author may often agree, we should not leave this apparent consensus to chance. Here, we build on the conceptual framework used by Pagano and Bowman (1995:21), who describe city efforts at urban revitalization as “mobilizing public capital”:

Public capital … denotes not only monetary resources or investments but anything of value, tangible or intangible, available for development purpose. Public capital is the collection of policy instruments that city governments have at their disposal to encourage, control, or complement development. Mobilization refers to the sequential process of selection, packaging, and utilization of those resources.

Thus, the process of managing capital resources for central city revitalization may be operationally defined as the efforts taken by municipalities to utilize their assets (be they physical or monetary, public or private) for the purpose of facilitating economic development in central cities during a period of diminishing federal support.

Examining each phrase more closely, what is meant by “managing capital resources”? In the political economy literature (see Logan and Molotch 1987), capital usually refers to the exchange value of local resources. Exchange value may be defined as the rent that accrues to the owners of property. Property is usually associated with land and the structures sited on that land. These structures include festival marketplaces, convention centers, hotels, stadia, aquariums, museums, waterfront developments, office developments, mixed-use developments, luxury housing, and retail centers (Schwartz 1995). In addition, structures also refer to public capital investments: highways, streets, sidewalks, transit systems, sewerage, sanitation, parks and recreation, and public buildings—including schools, health units and hospitals, and fire and police stations (Gramlich 1994). Property, however, is not limited to real estate; it also takes into account other physical, intellectual, and financial goods and services.

How do public officials effectively and efficiently manage capital investment? What are the best means to facilitate economic development? Beauregard (1993) characterized economic development as a process in which individuals and organizations engage in the production, distribution, and consumption of goods and services. However, the direct benefits of economic development are confined to those who make the investments (corporate executives, financiers, real estate developers, and industry representatives) and their institutional partners (commercial banks, pension funds, venture capital). If these agents of economic development do not reap positive returns (or increasing rents) from their investments at a particular site, they will move to other locations and thus allow that initial site to deteriorate (Feagin 1987; Harvey 1989; Soja 1989; Stone 1987). Discussions on the consequences of capital investment as well as statistical data reveal that, more often than not, that initial site has been the central city. Central cities and their low-income residents suffer from the investment decisions of the corporate and power elite.

It seems ironic that city officials would place the interests of central city residents second to those of capital. But, as described by Sam Bass Warner in The Private City (1962), this has been true of our nation since its very beginnings. The relationship between capital and the central city has been described by the concept of privatism. Privatism refers to the active role of government in increasing exchange value for the benefit of property owners. Squires (1991: 199-200) defines privatism in this way:

[C]oncretely, the policies of privatism consist of financial incentives from government (e.g., tax abatements, low interest loans, land writedowns, tax increment finance districts, enterprise zones, urban development action grants, industrial revenue bonds, redevelopment authorities, and eminent domain) to private economic actors. These financial incentives are intended to reduce factor costs of production and encourage private capital accumulation, thus stimulating investment which ultimately serves both private and public interests.

These financial incentives—which have historically managed the central city’s capital resources and increased its exchange value—tend not to increase use value (Logan and Molotch 1987). Traditional financial/locational incentives do not necessarily enhance human activity in the central city as a place to live, work, and play. Therefore, the goal behind managing capital resources for central city revitalization should be to maintain the balance between exchange value and use value. The contributors to this text consider this balance.

What is meant by the phrase “central city revitalization”? The central city is commonly known as the core or center of a metropolitan area. A central city, compared to surrounding municipalities, is also characterized by a greater population density as well as by a greater density of economic activity (Bogart 1998; Mills 1972). Within the central city, density of economic activity in the downtown area or central business district is greater than at other areas in the central city. Downtowns, at the expense of other central city locations, have experienced considerable revitalization. According to Holcomb and Beauregard (1981: 1),

urban revitalization implies growth, progress, and the infusion of new activities into stagnant or declining cities which are no longer attractive to investors and middle class households. Typically, urban revitalization involves investment to remodel or rebuild part of the urban environment to accommodate more profitable activities and expanded opportunities for consumption, particularly retail and housing for middle- and upper-income households … areas of the city are upgraded for higher social and economic uses.

The main ideas discussed in this section—exchange value, use value, and privatism—address a consistent theme found in most of the urban revitalization literature.

OVERVIEW OF THE URBAN DEVELOPMENT LITERATURE

Our objective is not to classify the exhaustive literature on urban development. Since a logical and orderly national research agenda has been lacking in this field, much of the available literature has been sporadically reported by researchers from a number of disciplines, including architecture, geography, history, political economy, sociology, and urban planning. Moreover, these scholarly efforts have been uncoordinated. We are concerned with those recent works on urban development that provide a policy-oriented perspective and an evaluative perspective of revitalization strategies.

The historical record (see Chudacoff and Smith 1994) reveals that the problems associated with our central cities have been brewing since the early 1900s but it was not until the 1950s that the urban predicament received wide public attention. Even then—as Teaford (1990) points out—strategies to revitalize the central city have been piecemeal and haphazard. Central cities continue to decline in population, employment, and incomes. The suburbs, on the other hand, prosper. Should federal and state governments frame a coherent policy to revitalize the central city? Peterson (1985) holds that, in the new urban reality, central cities should be allowed to fail; no set of place-based strategies can retard or reverse the social-economic-political decline of the urban core. In contrast, Cisneros (1993) argues that the urban core is the engine that drives the regional economy and thus the national economy. Therefore, Congress and the president must draft a national strategy for revitalizing the central city.

Peterson (1985) and Cisneros (1993) reprise the ongoing policy debates between people-based strategies and place-based strategies. People-based strategies are those policies and tools designed by government (more commonly at the federal level) to enhance use value. Place-based strategies are those policies and tools designed by government (either at the federal, state, or local level) to increase exchange value. It should come as no secret to the student of urban affairs that the nation’s revitalization policies have tended toward place-based strategies: urban renewal, urban development action grants, enterprise zones, and the cornucopia of tax incentives. These strategies, however, generally have not benefitted low-income residents of older industrial cities.

In 1985 the Brookings Institution released Paul Peterson’s volume, The New Urban Reality. Peterson and colleagues contend that the twin issues of technology and race argue against further investments in the central city. They address two main questions: Is the industrial city declining because technological innovation has rendered its infrastructure and land-use patterns out of date and inappropriate for the late twentieth-century economy? Has racial distrust contributed to the decline of industrial cities by accelerating rates of change in both residential choice and employment opportunities?

Technological advancements have transformed the urban economy from one based on blue-collar labor and manufacturing to one based on services and knowledge-intensive industries. This transformation has also led to higher skills requirements. A consequence of these requirements is increasing productivity, which in turn means increasing incomes for workers. Better incomes, however, allow well-to-do families to take advantage of the larger-sized housing opportunities and other amenities available in the suburbs. This circumstance leaves the central city with a majority of the population that cannot meet the education and training requirements of most good-paying jobs. Thus, the poor labor supply and the growing concentration of poverty in the urban core convince firms to leave the core for other locations (e.g., the suburbs, rural areas, other metropolitan areas, or offshore locations). Moreover, public services are often cut back when central city revenues and intergovernmental aid decline. This action aggravates financial disinvestment: banks cite the lack of adequate public investment and the lack of mortgage demand (Adams 1988; Shlay 1989).

The exodus of the middle class has also left the central city fractured and polarized. The urban core is polarized between an elite but small number of upper-income households and a majority of low-income residents—some of whom are elderly, others who are on welfare, and a growing number who are ethnic minorities (black, Hispanic, and Asian). The urban core is fractured because its ethnic groups perceive each other as competitors in the fight over diminishing resources. Peterson, and the contributors to his volume, recommend policies that afford minorities more residential choices. Specifically, Peterson (1985: 29) suggests that medical, welfare, and social services should be relocated from the central city to small towns and rural areas:

Such a [dispersal] policy will do more than merely shift the racial problem from cities to small towns and the countryside. The intractable nature of black poverty in the United States comes [in part], from its excessive concentration. Dispersion and diffusion can have multiple benefits. The poor and dependent would have greater choice and need not constantly reconnect themselves to bureaucracies with every move. To the extent that many would move away from the central city, the poor would suffer less crime and enjoy greater family stability.

People-based strategies, such as those proposed by Peterson (1985), rely on an altruistic principle: it is society’s responsibility to help those who cannot help themselves, and society in the form of government must serve as the safety net of last resort for households and families. This altruistic desire, however, has not created another New Deal or Great Society. It appears, especially since 1980, that the federal government has taken the position that a political or policy-oriented case for revitalizing the central city and reinvesting in its low-income residents must rest not on altruism but on privatism.

Following the 1989-1992 national economic recession, a unique place-based argument for central city revitalization emerged. The National League of Cities (especially work by Ledebur and Barnes 1993, 1997) and the U.S. Department of Housing and Urban Development (in particular the text edited by former secretary Cisneros 1993) reopened the debate on the relationship between central cities and suburbs. They argued that failing cities breed failing suburbs. Moreover, they claimed that the quality of life in the suburbs depends on a strong central city that provides jobs for the region’s residents and houses the region’s educational and cultural institutions. Thus, unless socioeconomic decay in the urban core is reversed, it will spread to the inner suburbs, outer suburbs, and the metropolitan fringe (Ledebur and Barnes 1993; Savitch et al. 1993; Voith 1992). In order to reverse decline, federal and state governments must increase public investment in the core. While this dependence argument seems appealing, it is not supported by data: suburbs do not rise or fall with respect to socioeconomic conditions in the central city (Mumphrey and Akundi 1998). Other nationwide strategies for stemming decline and revitalizing the core and its adjacent communities include regional governance structures (Gerston and Haas 1995; Orfield 1997) and targeting dynamic industry clusters (Porter 1995).

Judd and Swanstrom (1998), in City Politics: Private Power and Public Policy, examine the nature of privatism in the United States. Some scholars have examined specific examples of privatism (Clarence Stone i...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgments
• Series Editor’s Preface
• Chapter 1 Managing Capital Resources
• Chapter 2 Impacts of Urban Redevelopment in Central City Neighborhoods
• Chapter 3 TOADS: Instruments of Urban Revitalization
• Chapter 4 Managing Development m New York City: The Case of Business Improvement Districts
• Chapter 5 Sports Stadia: A Strategy for Downtown Redevelopment
• Chapter 6 Conclusion: Summary and Future Research
• About the Editors
• About the Contributors
• Index