“Creativity is intelligence having fun.” ~ Albert Einstein
Last Spring, 2015, in an article in the Star-Tribune, we got a frank admission of failure from Ward 7 City Council Member Lisa Goodman on the subject of vacant and abandoned properties in Minneapolis:
“What we’re doing is not working,” Goodman, who chairs the city’s community development committee, admitted. “So any option that would get these homes into the hands of people who want to restore them and live in them has to be something we think about differently.” Star-Tribune
Of course, any admission of failure on the part of government will set any free marketeer’s heart pounding for sheer joy. But the simple truth is that the free market has failed, too. Nor is there the slightest indication that “market forces” have any real power to fix the problem. Because, you see, there’s no money to be made — but there’s plenty of money to lose: in lower property values for neighborhood residents, in lower property and business taxes for schools and infrastructure maintenance, etc. It’s a classic Free Market fail.
Maybe it’s time to consider whether the problem might be bigger than either city government, or the free market, has the chops to handle. As former Chrysler CEO Lee Iacocca once said, “Big problems require big solutions.” His point was that even the CEO of a major corporation can only affect what’s within his purview or power. He has to know when a problem is bigger than the power of his office can resolve. He has to know when he needs to get outside help. In Iacocca’s case, he needed a $400 million loan from the federal government and he needed his creditors to reschedule or restructure loans (to share the pain) in order for Chrysler to remain solvent. Solvency was the big problem he needed to solve … and he needed solvency of thinking to reach a solvent solution. What resulted is business history. Or, Big Government success.
Other examples of Big Government successes include bailing out the Big Banks, Big Auto, and Fannie Mae and Freddie Mac. According to Politico, of the 618 billion dollars spent on TARP, Detroit and the GSE mortgage lenders, 683.4 billion has been returned to the US Treasury — resulting in a net profit on investment of 65.4 billion, or a 10.58% ROI. That the highest return you can get anywhere. No wonder foreign investors are parking their money in US cash and securities.
Big business sometimes handles big problems by pulling all the big stakeholders into a conference room, locking the doors, and forbidding anyone to leave until a tenable solution has been agreed to. I’ve been fortunate enough to sit in a couple such meetings as a dispassionate documentarian tasked with producing a fair record of the proceedings. In both cases, tension in the room was palpable. Executive careers and salaries were on the line and the conference rooms stank of body odor, dyspepsia, and fear. Put 10 or 12 sweaty fat guys in a room who are making 350K – 750K a year and tell them to get creative or lose their jobs and they get real creative, real fast. For me, the lesson was clear: amazing creativity comes out of a meeting where a clear line will be drawn between the quick and the dead. In some ways, it’s like the free market competitive model so often touted by folks on the right — if equally inhumane. In a different way, it’s a fascinating model of human behavior by individuals under extreme stress: a category of behavior about which I’d already learned more than I ever cared to and had come to know too well.
I’ve wondered from time-to-time when it comes to addressing a big gnarly civic problem like vacant/abandoned homes — and its contributions to driving a neighborhood into decline, with all the attendant evils that that implies — why city government doesn’t do something similar? Admit that what you are doing isn’t working, that the power and resources you are applying are ineffective, and ratchet-up the scale of the solution to meet the scale of the problem? Of course, local government can’t apply career pressure on players or stakeholders, other than city employees perhaps, but it can apply contractual and economic pressure on suppliers, providers and beneficiaries. Every corporation has its sh*t-list of “disapproved” vendors. I’d imagine local governments do, too, though I don’t really know. But there’s also the pressure of missed business opportunities, the kind that can weaken your business and strengthen your competition — more about that later. Simply put, there are multiple ways to turn down or turn off lucrative and reliable revenue streams to suppliers that serve as both carrot and stick in modifying business behavior.
The other thing city government can do, of course, is provide fearless leadership. It seems sometimes that we don’t have the political will, or the creative thinking, to try something new and radical for fear of failure. I don’t blame anyone in elected office for playing safe, if you think that one bad move might kill your career. (See? We know you’re human too and live like the rest of us. Really, we do.) But this is Minneapolis: the urban political landscape doesn’t get much bluer than this (maybe Boston … maybe), so shouldn’t we be willing to think along the lines of at least trying something a little radical? Call it a “pilot program” to provide some political cover and an exit point, if you must.
Then we could counter the recurring criticism among voters that I get on the front porch when I go door-knocking for candidates: “What, you people again? Every year you ask for my vote and every year nothin’ around here changes. It just keeps getting worse.” I’m still looking for a good response for that one: “Um, well isn’t it getting worse SLOWER?” Let me know if you have a better answer.
For years, I’ve been shopping around the idea of Directed Resurgent Neighborhoods to anyone I could button-hole long enough to hear me out: elected leaders, bankers, union guys, clergy, you-name-it. Brother, I earned my reputation as a boring dinner guest: now I don’t get invited anywhere any more. I even shopped the idea by letter to former Mayor R.T. Rybak (hoping he might pass it on to the cognizant powers in city government), to Rep. Keith Ellison, and even to Governor Dayton (hoping that some worthwhile response or direction might come out of it). I got no correspondence back from any of them. Well, I do get their fundraising letters and emails several times a year.
The reason I keep faith with my forlorn hope is that the feedback among those I’ve canvassed has always been universally positive: “That’s a helluva good idea,” my conversational correspondents have told me time and time again after I fully laid it out. I would have just chalked it up to typical Minnesota Nice at a holiday party, but I could see the mental wheels turning, the shine in the eyes, the unconscious nodding about the possibilities. Nothing has ever come of it, yet hope springs eternal.
The idea of applying community resources to a neighborhood in decline, often called neighborhood revitalization, is nothing new. James Cunningham explored it fully in his ground-breaking 1960’s book The Resurgent Neighborhood. Cunningham examined the different drivers that turned around neighborhoods in decline and made them attractive again for home buyers, property owners, small businesses and developers. But Cunningham was primarily interested in examining the different forces that caused the decline of neighborhoods and the different drivers that produced a resurgence of neighborhoods formerly in decline. He did not discuss marshaling a broad regime of community resources and orchestrating them for the directed purpose of producing a resurgent neighborhood.
There exist now numerous examples of how to apply directed community resources to produce a broad-based result: they are called Economic Enterprise Zones. An Economic Enterprise Zone is a designated area for which policies are implemented to encourage entrepreneurship, business development and growth. Economic Enterprise Zones attract capital and new business start-ups into the zoned area by offering tax concessions, low-interest business loans, rent-subsidized facilities, infrastructure support, and reduced or suspended regulations — until businesses are self-sustaining. The idea is that as successful businesses get established, jobs are created, the neighborhood improves and attracts more investment, housing values increase, property taxes increase (allowing for more investment in community services and infrastructure improvement), and an upward-spiraling virtuous circle is established.
The Twin Cities has a lot of varied experience with both Economic Enterprise Zones and with resurgent neighborhoods: Grand Avenue in St. Paul, Central Avenue northeast and the Cedar-Riverside neighborhood in Minneapolis to name a few. The uptrend along University Avenue in the Midway area of St. Paul, just in the few months since the light rail line was established there, already have been startling. In each of these cases, though, there was a commercial and/or demographic component that helped drive the neighborhood’s recovery and resurgence.
I should note here that urban revitalization — with all that that term implies — historically has been a driver behind the creation of Economic Enterprise Zones, particularly here in the US. So why can’t the same methods be used to directly revitalize neighborhoods by creating Neighborhood Enterprise Zones? A Neighborhood Enterprise Zone would also apply a range of policy tools to encourage growth and re-development including tax concessions, low-cost loans, infrastructure support, and reduced or suspended regulation, until the neighborhood bootstraps a sustained resurgence — becoming a Directed Resurgent Neighborhood.
You might ask: What’s the difference? I’m glad you asked that. The typical Economic Enterprise Zone seeks to attract business entrepreneurs and investment capital for businesses, usually without much concern for the nature of those businesses, expecting that the collateral effects will be the creation of jobs, improving property values, etc. In a Neighborhood Enterprise Zone, neighborhood revitalization IS the business. Abandoned, vacant, sub-standard, and sub-market housing is the business inventory and the stock in trade. The establishment of a local micro-economy that is better able to interface housing supply and demand with the macro-economy is the primary business objective. A resurgent neighborhood that “lifts all boats” in terms of property values, new business opportunity, job creation, social stability, wealth generation, and a higher tax base for supporting city services and infra-structure improvement are the ultimate pay-outs.
We’ll examine some of the policy platforms and economic dynamics of the Directed Resurgent Neighborhood in Part 2.