NEW STRATEGIES for the Nineties
The reader who has suffered through this history may by this point have realized that through the 1980s, slowly, surreptitiously, incrementally a variety of “Great Forces” transformed economic development as a policy area and profession.
By the late 1990s/2000 it evolved into our present-day “Contemporary Economic/Community Development Era.” Providing a taste of what lies ahead in a future book, this section briefly outlines a number of selected strategies, programs and tools that were developing previous to 1990, but flowered after that period. Chosen for inclusion are economic gardening, casino gambling, and new urbanism. We start, however, with a discussion/description of Clinton’s 1990s’ federal initiatives, including New Markets, and their awkward fit with the community development nexus.
Federal Government Carves Out a Role: People v. Place
Community mobilization and CDC neighborhood community economic development strategies blurred if Alinsky’s IAF was any indication. Neighborhood-level CD could not escape its place-based approach to empower, mobilize and revitalize deteriorated geographies populated by low-income and minorities in an era of deindustrialization. That meant assimilation requiring movement to other geographies, potentially at cross-purposes with its place-based focus. People-based and comprehensiveness remained cornerstones, but were linked with revitalization of deteriorated, mostly central city neighborhoods. It was difficult enough to change people, but to change neighborhoods physically and economically at the same time was no small feat, with or without Reagan. More and more the likelihood a Third Ghetto may have developed—a ghetto that no longer had believable hope that a job was achievable.
The national atmosphere that sustained aggressive community organizing began to lose steam previous to Reagan’s election—or, more precisely, Privatist anti-tax referenda (and organizing) captured the media and the public’s attention. Reagan deemphasized and defunded HUD-style housing and CD programs. That, of course, set back local CDCs. Reagan and Bush moved in a different direction, providing assistance directly to people. Reaganism had stolen CD’s thunder. Two programs in particular— earned income tax (EIC) and low-income housing tax credit (LIHTC), expanded by the 1986 Tax Reform Act—dramatically reshaped federal anti-poverty and low-income housing approaches. Reagan’s initiatives were not limited to distressed neighborhoods; those eligible got benefits wherever the low-income person resided.
LIHTC provided incentives to private investment in low-income affordable housing. Today it is estimated that more than 90 percent of low-income affordable rental housing utilizes LIHTC, which is not linked to distressed central city neighborhoods. EIC (which actually started in 1975) provides tax credits to qualifying low-income families with children. At least 26 states have added their own EIC tax credits as well (2012), as have some sub-state jurisdictions (Montgomery County, MD, NYC and San Francisco). Both programs have incrementally expanded several times since their creation. To think of these federal “direct-to-people” programs as Privatist CD would be controversial; both fall in a cultural limbo (or gray area). Still, as early as 1990, a major study of CDC financing reported 94 percent of CDCs that responded received more than $50,000 annually from LIHTC for program support.11
The same could be said for HOPE VI, a page-turning public housing redirection that is usually credited to the Clinton administration but actually grew out of the 1989 Congressional National Commission on Distressed Public Housing. The Commission’s recommendations/action plan called for a radical redirection of federally supported public housing. Congress and the new Clinton administration concurred, approving legislation that among other reforms provided substantial funds for demolition of severely distressed public (high-rise) housing. Remembering that such public housing was Age of UR outputs, HOPE VI represents real page-turning legislation. Snuck into the legislation as one of its three goals was to provide (replacement) housing that would avoid or decrease the concentration of very low-income families (Popkin et al., 2004). This countered CD’s place-based distressed neighborhood focus.
Clinton continued Reagan-era federal direct-to-people anti-poverty/welfare programs. EIC was expanded and the minimum wage increased. Clinton’s main focus was welfare reform: Aid to Families with Dependent Children (AFDC), Temporary Assistance for Needy Families (TANF). With a reenergized EIC, the emphasis was to “make work pay.” Families and households got a meaningful lift from EIC, mitigating some of the dour effects of TANF. TANF was the newest block grant on the block, and its passage was treated with some skepticism by community developers.
TANF significantly reduced the number of people on welfare rolls, although those concentrated in high-poverty inner-city neighborhoods were least successful in leaving welfare. It is not clear, whether the lot of former recipients has improved. Many simply went from the ranks of the “welfare poor” to the “working poor” with no betterments of their living standards. (Dreier, 2002, pp. 129–30)
By this point it was clear this form of intergovernmental transfer was preferred to Great Society categorical grants.
One could see in Clinton’s signature 1993 Empowerment Zone (EZ) legislation the need to break up concentrations of poverty by connecting people to opportunities, not only in suburbs but also across the nation. The EZ initiative designated 11 zones, each eligible for $100 million in grants and tax credits for investment and hiring of low-income residents; also created were 95 Enterprise Communities (ECs) eligible for more limited grants and credits, and 4 Enhanced Enterprise Communities (EECs).
The EZ initiative satisfied Clinton’s electoral covenant with cities, but its reliance on private sector market incentives was not well received by many community developers. In linking low income to opportunities, wherever such opportunities might be, EZ pursued a bottoms-up, locally driven, comprehensive set of programs in distressed inner-city neighborhoods—”community-building partnerships for change”; but it challenged physical/economic neighborhood revitalization. EZ, however, included the usual “comprehensive” array of social programs (housing, education, job training and human service programs) and was coordinated by a “community service board” with residential membership as well as governmental and agency leadership (O’Connor, 1999, pp. 115–17).
The ambiguity between place-based people community development and deconcentrating poverty made some community developers wonder if Clinton and they were on the same page. EZ asserted that it sought to invest in people and places, recognizing the old dichotomy as false. Many community developers were not sure it was false. In 1995 this tendency toward dispersion, rather than “gilding” the ghetto, was made more explicit in Clinton’s 1995 HUD Urban Policy Report, which asserted that:
America’s cities have been in trouble. Poor families and poor inner city neighborhoods have become disconnected from the opportunities and prosperity of their metropolitan regions, the nation, and the emerging global economy. A vicious cycle of poverty concentration, social despair, continued outmigration and fiscal distress in central cities undermines the ability of metropolitan regions to compete … Moreover, the polarization of urban communities— isolating the poor from the well-off, the unemployed from those who work, and minorities from whites, frays the fabric of our nation’s civic culture.
A later pilot program, “Moving to Opportunity,” provided Section 8 vouchers to 7500 residents from six inner-city neighborhoods “to escape ghettos and move to better neighborhoods.” Another pilot program, “Bridge to Work,” provided enhanced transportation access for poor inner-city residents to jobs in the suburbs (Dreier, 2002, pp. 129–30).
New Markets
In his second term Clinton struggled with a resurgent Republican Party, Contract for America, and attempted impeachment. If anything were to be accomplished it would be bipartisan, and likely involve corporate America and more Privatist forms of ED (physical redevelopment and financing). Foundations and philanthropies provided a convenient meeting ground and a forum for incubating new ideas for public/private, central city, low-income neighborhood reinvestment. The New Markets Tax Credit, Clinton’s last major urban initiative, developed out of this nexus.
The American Assembly, a bipartisan business-led think tank, issued a report after its 1997 annual meeting. During that meeting debate, triggered by Michael Porter’s research on the potential of inner-city redevelopment, urged business to invest in inner cities to foster something called “community capitalism.” Community capitalism was a fancy name for business investment and job creation in distressed communities, with government and the neighborhood community playing a supportive role. Access to capital and provision of technical assistance to investors by knowledgeable intermediaries were essential requirements. The American Assembly sent its report to the White House, where it caught the attention of Al Gore—who was contemplating a run for the presidency. New Markets Tax Credit in the Community Renewal Tax Relief Act of 2000 was the reaction.
New Markets was a vehicle to provide investment (equity or near equity) to distressed low-income communities (and presumably neighborhoods)—both urban and rural. An annual “allocation” of tax credits is made by Congress, and its administration handled by the Department of the Treasury’s CDFI Fund. CDFI awards tax credits to Community Development Entities (CDEs) that award them to specific qualified businesses making a fixed asset investment in defined low-income geographies. Advantages include lower interest rates and less strident terms and conditions—without New Markets such projects would likely not have sufficient financing available. Through 2014, New Markets dispersed over $38 billion to leverage $75 billion in new investment to troubled geographies. The program formally expired in 2014, but lingers on in several bills at the time of writing. New Markets targeted certain geographies of concern to community developers. It is hard to envision, however, it being described as a community development program—again exposing Clinton’s awkward dance with community development.
Economic Gardening
The 1987 recession prompted the folk in Littleton Colorado to take a second look at their economic development program.12 The two “big boy” firms in the community of 41,000, Martin Marietta and Marathon, were cutting back employment—and that was very bad news. So the economic development staff and several members of the city council reviewed the efficacy of their past ED efforts. Up to that time, Littleton had joined with state and regional programs that recruited firms, especially from vulnerable California. The results were best described as “erratic.” On top of that, the city’s top urban renewal project (an upscale retail center) was languishing and well on the way to its eventual “belly up.” Since bad new comes in threes, the final knock on the head was a home improvement company, a recipient of a tax-exempt bond financing that went bankrupt and closed. In 1987 it seemed nothing was working well (Woods and Gibbons, 2010).
Deal-making and tax abatement seemed especially worthless as long-term ED tools. Staff and council members began a review of the various programs “out there,” and they came across David Birch’s The Job Generation Process (1979) and a research paper by Paul Romer (1986), “Increasing Returns in Long-Run Growth.” From Birch they were impressed with the power and importance of small business as the creator of jobs; from Romer they gleaned that the real driver of successful companies was innovation and knowledge (creative ideas), both of which were “sustainable”—no depletion of existing resources. Because Littleton was at its core a farming community, the team adopted the metaphor “economic gardening”:
We presented the city council with an image of a garden: when you plant a garden, you do not know which of the vegetables will produce the greatest yield, so you fertilize and water all of them equally. To contrast this strategy with the corporate and deal-making strategy, we used a big-game hunting metaphor. As every hunter in Colorado knows, you can go for many years without bagging a trophy elk. Similarly, economic hunting can be an exciting strategy, but the better odds are with economic gardening. (Woods and Gibbons, 2010, p. 3)
After finding qualified staff, the first economic gardening program started in 1990 when they offered a customized data search service to local firms. The insight came from interviews with individual firms. The need for data by firms for one thing or another was high, and the program immediately exploded. By 2010 this program had expanded to four full-time staff and had extended its scope to search engine optimization, social media, GIS and graphic design—and dealt with 300–400 service requests annually and an additional 100 customized consulting. There is no eligibility, no picking of winners or targeting key sectors or clusters. Littleton’s job growth in this period was from 15,000 to 30,000; unemployment remained below the national average.
Economic gardening is not a search engine optimization program. It is asking your existing firms what it is the community can do for them—then sorting through and giving them what they asked for that the community can realistically and reasonably provide. It’s more than a retention program; it is a growth-oriented program as well. It is focused on small firms and abandons for the most part the big supply-side tools. It disavows deal-making and attraction-recruitment. No one claims this strategy fits all communities. Littleton officials suggest suburbs are most conducive to its charms and rural areas may have a tough time developing the expertise needed to run the programs. There is no reason it couldn’t be an element of a larger ED program—save for its philosophical origins.
Casino Gambling: Don’t Bet On It!
Economic developers have an awkward relationship with gambling, particularly casino gambling. This is somewhat strange in that economic developers typically claim credit for virtually any economic growth within their jurisdiction. Casino gambling is mostly a state-driven ED program, with the state doing most of the negotiation and garnering a goodly share of tax and fee proceeds. Legal gambling (all forms) in 2012 generated nearly $100 billion in revenues. Casino gambling in 1991 produced $9 billion in revenues; in 2013 casino revenues were in excess of $50 billion.13 In 2012 an incomplete assessment by the casino industry (not including for example tribal gambling) asserted that nearly $8 billion were paid to governments in 22 states.14 I’ll wager it has increased since then. In fact, the onslaught of online gambling, combined with New Jersey, Nevada and Maryland doubling down approving new facilities in 2012–13, promises yet a second wind to gambling’s continued growth.
Taxes generated from casinos and lotteries have been an increasing mainstay of state governments and education systems; the jobs provided by casinos are significant and well appreciated by the public as a whole. ED community college workforce programs train casino dealers and offer certificates. Casinos are reliable visitor destinations, spinning off their fair share of hotel rooms and retail sales. Casinos have proven to be an economic development home run—and a moral disgrace to the profession. If tax receipts are any guide, casinos (and other forms of gambling) are the most successful and lucrative single economic development program in America.
Casino attraction usually requires controversial legislative approvals at state and local levels. Casino attraction has been a gubernatorial prerogative-initiative. The usual ED recruitment programs are largely inappropriate to casino attraction. Also consider the rather sad image of providing tax abatement to a casino? How long it can continue, with a casino on almost every street corner, is anyone’s guess; but the odds are casino gambling has a few years left. The last thing we attempt is a history of gambling in America or a comprehensive analysis of casino gambling and economic development. Economic developers, however, should have some familiarity with this strategy, if only because in the sad event the bubble eventually bursts, economic developers will be tasked to clean up the mess—and maybe blamed for it as well.
First things first. Gambling in America has a longstanding tradition, dating from colonial times to “Maverick on the Riverboat Queen,” pari-mutuel horse racing and, of course, the ubiquitous state lottery.15 Casino gambling as a widespread state ED strategy, however, is relatively recent. Casino gambling skyrocketed after 1989 but got started in 1931 when Nevada legalized casino gambling. In 1947 Bugsy Siegel opened the Las Vegas Flamingo. From 1966 to 1970 the quirky Howard Hughes purchased Las Vegas properties and transformed them into legitimate business corporations; in 1973 Harrah Entertainment was the first casino to be listed on the New York Stock Exchange. New Jersey, in 1976, saw an opportunity and legalized Atlantic City as the nation’s second legal location for casino gambling. The Mirage Hotel and Casino opened in Las Vegas in 1989 (3000 rooms) and the era of Las Vegas as a world-known tourist destination commenced. By 2003, Las Vegas had 61 casinos, amassing $5.3 billion in revenues and attracting 35 million visitors annually to fill in excess of 100,000 hotel rooms. At its peak Atlantic City held 13 casinos and generated $4.3 billion in revenues with 32 million visits housed in 12,000 hotel rooms.16 In 1989, however, casino gambling got complicated.
Since the 1980s the Cabazon Indian Band (near Indio California) had been struggling with the state of California over the operation of bingo games and poker halls (i.e. casinos).17 The legal struggle reached the United States Supreme Court in 1986. The Court’s decision was that the federal government, not the state, had the power to regulate gaming on a tribal reservation—upholding tribal sovereignty, but in the process potentially making gambling and casinos legal upon any congressional action. Congressional legislation (Indian Gaming Regulatory Act), signed by Reagan in 1988, provided for casino gambling subject to a “compact” (i.e. tax) being agreed to with the state. The legislation launched the Native American casino industry, which in 1988 garnered an estimated $100 million to a sector which in 2012 achieved nearly $20 billion in revenues. By 2011, 12 states had authorized 28 casinos and a total of 25 states had authorized Native American casinos.
Shades of Mark Twain, riverboat gambling (the third form of casino gambling) started in Iowa and Illinois in 1991 and then spread to Indiana, Missouri and Mississippi. Land-based casinos followed in Louisiana and Michigan, which authorized such casinos by 2003.Since 2003, when nine states had authorized non-tribal land-based casinos, 23 states (22 with operating casinos) have placed a bet on land-based, non-tribal casinos. At least eight others were considering authorization, and a number of states were approving legislation to increase the number and type of casinos in their states. The industry claims to employ over 332,000 workers (170,000 in Nevada with over 400 casinos, $13 billion in wages), generates in excess of $37 billion in revenues (not including Native American casinos) and has paid an estimated $8.6 billion in taxes to states. Las Vegas, Atlantic City, Chicagoland, Detroit and Connecticut are the top five markets—all generating more than $1.2 billion annually in revenues.18
The issues, salient to economic developers, arising from casino gambling are several. The historically volatile nature of the public’s willingness to accept legal and public gambling is testified to in that casino gambling is usually credited to be the “third wave of American gambling.” The other two waves eventually went down for the count. Scandal, crime, individual misuse and shifts in public and private morality provided plenty of opportunity for casino gambling’s deck to be reshuffled. The “close” contractual and regulatory relationship of state governments with interstate/ international casino companies raises issues of potential concern.19 The dependence of states, localities and even school systems and unions on casino revenues and taxes merits additional concern. The overall effect of casino revenues on state finances is beyond our ken and purview—but clearly could lead to unfortunate realities under certain conditions. Casinos were approved and depend upon a public acceptance largely linked to goals traditionally perceived as economic development related. The public perception of economic development is indirectly tied to casino gambling.
In 2015 it was estimated that the total spent on all forms of gambling in the US (including lotteries) was in excess of $104 billion dollars, from which state governments’ share was about $20 billion. Lotteries comprised about two-thirds of the state receipts (2015) and casinos less than $9 billion (31 percent).20 Casinos on Indian reservations are not included in US statistics and in 2015 they generated nearly $30 billion in revenues from 459 casinos in 28 states, which compared to $38.3 billion revenues from US commercial casinos. California, dominated by Indian casinos, placed second to Nevada in revenue. Pennsylvania’s commercial casinos garnered the most at $3.2 in 2015, surpassing the struggling Atlantic City.
Las Vegas depends more on tourism spending than gambling, which peaked in 2007 and has not yet recovered to its pre-recession high of $6.8 billion. As of 2015 only three states (New Jersey, Delaware, and Nevada) had legalized online gambling—attracting an estimated 10.8 million gamblers and $6.8 million in revenue, most of which was offshore and extra-legal. Legalized online gambling yielded only $160 million in revenues. BTW slots generated about 75 percent of casino revenue. In 2015 only Hawaii and Utah had no legal commercial or Indian casinos, lotteries, or other forms of gambling. Rhode Island, according to the Rockefeller Institute, collects in excess of $457 per resident from gambling—the highest state rate—but NY collects the most money overall from all forms of gambling to fund the state government ($3.2 billion); Pennsylvania is second ($2.4 billion).
Market saturation and economic downturn (the industry is cyclical) will also play a role in its long-term evolution. Casino gambling, especially destination gambling (as opposed to day-trip gambling), is real estate driven. The ultimate impact of the internet and its forms of gambling has yet to play out. A downturn in casino gambling can have serious consequences for local real estate markets and unemployment rates—witness Atlantic City in 2016. All this is true of many industries and sectors, but the casino gambling sector is one which may or may not respond to normal sector competitive dynamics and counter-checks.
NEW URBANISM
It had to happen sometime. At some point, one always knew suburbs would become “chic” and “the place to be” to those who really mattered in society. New Urbanism, which today describes itself more as “neighborhood”-style development, took center stage with the building of a small resort village in Florida’s Panhandle. In truth, New Urbanism began in 1981 from a Cooper Hewitt Museum exhibit on suburbs managed by a Columbia University professor, Robert A.M. Stern and the periodical AngloAmerican Suburbs. Most of the exhibit featured stuff we have discussed in earlier chapters such as Forest Hills Gardens and other Garden Cities. That is an important tidbit to know because a core thrust of New Urbanism was its rejection of Modernism and post-Modernist planning and architecture (our friend Le Corbusier) in favor of a return to “a blast from the past.” To be fair, the New Urbanism was also a rejection of the subdivision-style suburban sprawl—and, although it was pre-McMansion, it would have rejected them also.
New Urbanism has a little of something for almost everybody. It could tap into nostalgia for Howard’s and Unwin’s past, the extravagance of the City Beautiful, and accommodate green technologies, smart growth principles and solar energy conservation. Most importantly, it implied a return to the honesty and simplicity of small town America—in the modern age. Much of the New Urbanism, particularly in the nineties, identified with a modern variant of city-building. In some measure this was due to its first demonstrated success at Seaside Florida, developed by Robert Davis and his two architects, Elizabeth Plater-Zyberk and Andrés Duany.
Duany and Plater-Zyberk worked for Stern and Anglo-American Suburbs and were at the Cooper Hewitt exhibit. The Seaside project began in 1982 as a new resort community, planned to include 300 houses and approximately 300 cottages, shops, retail outlets, etc. The Seaside concept embraced density and design as central principles and that became translated into an entirely new and picturesque new-style community:
Seaside is different. Narrow streets radiate from a central green as in a New England village. The houses are vaguely Victorian, with tradition pitched roofs, porches and white picket fences. The lots are small and the buildings are extremely close together, bordered by heavy undergrowth. Sandy footpaths provide shortcuts behind the gardens. The casual atmosphere and the cottage like houses recall an old-fashioned beach community. (Rybczynski, 2007, p. 19)
Dolores Hayden describes Seaside in different terms:
In a remote location, reachable only by car, they developed a master plan for a small pedestrian-oriented resort of neo-traditional vernacular houses set in indigenous landscaping. The project was specifically designed to recapture a pre-automobile way of life. The developer wanted a place for “extended” porch-sitting, leisurely strolling, and sharing time with those you care most about. (Hayden, 2003, p. 205–16)
Seaside, after a sort of rough start, took off by the end of the decade. In 1990 Time magazine included it in its “Best of the Decade” issue; between 1988 and 1990 Duany and Plater-Zyberk contracted and started design on more than two dozen New Urbanist communities. Seaside was the location for filming the Truman Show. In 1993, they, along with others, formed the Congress of New Urbanism, which quickly moved into an image of being the cutting edge of architecture and planning (Duany et al., 2000). In 1994 the Walt Disney Corporation hired another developer to construct a New Urbanist community, Celebration, outside of Orlando. It too has been an enormous success.
New Urbanism, no matter how popular and trendy it may be, does have its critics. Some criticism simply taps into the diversity of consumer and household tastes. New Urbanist communities and neighborhoods do not suit the fancy of all (lack of privacy is a major concern). That leads into a more serious concern—that New Urbanism attracts white, upper/middle-class, affluent households and that these communities are simply not affordable on any scale to even middle-class folk. Diversity is not New Urbanism’s middle name.
Nevertheless, New Urbanist design principles have since been incorporated into hundreds of completed projects, ranging from public housing, malls and gentrification of neighborhoods. New Urbanism does offer a realistic, proven business model alternative to large-lot suburban subdivisions. Moreover, in reviving much of the neighborhood living focus of Perry’s early twentieth-century neighborhood movement, it returns to a more humanist sense of community many feel has been honored only in the breach.
Ron W. Coan 