Making Cities Work
By Nino Monea JD ‘17
National elections dominate the news. But precious little policy is actually coming out of Washington these days. And officials there are often disconnected from our daily lives. At the local level, the challenges of how to run an effective city may appear more mundane on the surface, but that does not mean they are less important, or less complex.
Among the most persistently vexing questions that local leaders face is how to attract families and businesses. In January, professors from Wayne State University and Michigan State University published a working paper that found that virtually all trendy economic development strategies employed by cities over the past several years, such as building casinos, are not the driving force behind growth.
Many cities attempt to spur economic growth using unproven techniques. Casinos are a perfect example of economic snake oil. In Atlantic City, lawmakers successfully pushed casinos on a skeptical population with the promise that the casinos would dedicate 2% of their annual revenue to the “health and well-being” of the city. After being built, the casinos were able to subvert the “health and well-being” part of the deal through a legal loophole. Much like the slot machines that they peddle, casinos usually have long odds for the city.
Rather than creating long-term growth, these sorts of projects often amount to little more than spitting matches between states. In 2013, then-Texas Governor Rick Perry made headlines for buying television ads in California encouraging businesses in the Golden State to relocate to Texas. The end result is not that new jobs are created; they are simply relocated.
Last year, Boston fervently attempted to win its bid to host the 2024 Olympic Games. The bid was vigorously opposed by the community group No Boston Olympics, which pointed out that the average price tag to an Olympic host city is $15 billion. The group also cited research that shows Olympic Games are bad investments. In fact, there has never been a profitable one, unless accounting tricks are used to gin up the numbers, such as counting subsidies from the government as revenue.
At least Boston had a relatively happy ending, as the community activists ultimately won and forced the city to drop its bid, and so the city did not end up losing any money. The same cannot be said for Brazil, which hosted the 2014 World Cup. The country spent $600 million to build a massive stadium in the rainforest city of Manaus that was used for all of four games. Another World Cup stadium cost Brazil $550 million and is now being used as a parking lot. This is a tremendous waste, given that, in Rio de Janeiro alone, over 200,000 people lack adequate housing.
Of course, not everything in life can be measured in dollars and cents. There can be perfectly legitimate reasons to invest in public projects that do not return a profit. The Hubble Space Telescope has not earned a dime, but that doesn’t make its photos any less stunning, or the knowledge about the universe that we have gained from it any less profound. But at the same time, if the goal of a project is explicitly to bolster economic growth, municipal leaders need to be upfront about what works and what does not.
In addition to being honest about which projects work, we also need to ask whom the projects are working for. In Detroit, casinos did honor their agreement to hire at least 51% Detroit residents, but several years after their development, there was no black representation in the casinos’ ownership, and the entry-level workers saw lower-than-expected wages. Moreover, the promise that the casinos would deliver $73 million for minority- and women-owned businesses never came to be.
In Boston, wealthy developer John Fish appeared to be the principal beneficiary from hosting the Olympics. Although he pledged to not bid on any projects, he said he would pursue contracts with transportation and college building agencies that would likely see upgrades in preparation for the games. Conversely, many areas around the state would not have seen any investments from the Olympics. Even worse, in Brazil, hundreds of thousands were displaced when their communities were bulldozed to make way for the gleaming new stadiums.
So is there anything that cities can do? According to Professor Laura Reese, a co-author of the economic development report from January, the solution is straightforward: “[j]ust run a good basic city.” To do this, city leaders should invest in things such as education, which is more strongly connected to economic growth.
While investing in public schools and basic municipal services probably is not as glamorous as a shiny new development project, it is a sounder strategy. It is no secret that there are tremendous benefits of early childhood intervention programs —particularly in low-income communities. A Rand Corporation survey of well-designed early childhood intervention programs found a litany of benefits ranging from higher academic achievement to lower delinquency and crime rates, and even greater success in the labor market down the road. The return on every dollar invested ranged from $1.80 to a whopping $17.07. The studies tended to the largest returns when long term benefits, such as careers and reductions in crime.
The benefits of a strong education system can also have benefits for people other than the individual students. For all of the efforts municipal leaders take to woo businesses with one-time investments or tax breaks, companies often want a trained workforce – something education is crucial to accomplish. That explains why local auto dealers have donated equipment to help with vocational training programs at Arizona high schools. They see it as a way to help increase the number of skilled technicians in the area that they hope to later hire.
More broadly, a report from researchers at Napier University in Edinburgh examined what factors businesses consider when deciding to locate or relocate. They found that some of the most important factors were a well‑educated workforce and low crime rates. On a similar note, the U.S. State Department has put together a list to help its employees decide where to live when they are deployed on tours to new locations. It urges families to consider social networks, career opportunities, and educational opportunities.
This should not come as a surprise. When families and businesses have to make long-term decisions, they look at the fundamentals, not frivolities.
Rather than putting all of a city’s eggs in one basket, the better course is to focus on core issues that have widespread appeal. Nearly everyone wants good schools, safe communities, and robust municipal services. If a city gets these things right, people and businesses will come, and entertainment venues that the community wants will naturally flow from that.
All this goes to prove the wisdom of Lee Brice’s advice on the secret to success: “Don’t outsmart your common sense.”