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8 Fostering Local Institutions to Manage the Transition Achieving national interests in the distribution of economic growth requires strategies tailored to specific urban areas. Such strategies require, in turn, institutions capable of carrying them out. Thus a major emphasis of national policy should be to help create and strengthen such institutions. There seems to be general agreement across the political spectrum that strong leadership at the urban level is essential to successful economic development programs (Committee for Economic Development, 1982; U.S. Department of Housing and Urban Development, 1980, 19821. Re- search on urban economic development indicates that one of the most important elements in the success of such endeavors is the institutional- ization of leadership, so that it has staying power as well as the political and technical capacity to capitalize on the competitive advantages and opportunities of its particular area. This recognizes the fact that urban development is a long, drawn-out process, with long lead times before physical changes can be completed. Even longer periods are needed to bring a broad strategy of economic and community development to the point at which financial and social returns can be seen. In an important sense, urban development has no end (Foster and Berger, 19824. Insti- tutions are therefore needed that transcend the arrangements required for individual projects. Although institutions must reflect local conditions, three elements stand out as important for an effective urban development process. The first is development of a strong, independent capacity for urban intelligence. The 152

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Fostering Local institutions to Manage the Transition 153 second is sustained public-private leadership and decision-making insti- tutions that create legitimate processes for making development decisions. Third is a strong and active independent sector. When all three exist, it is much more likely that an urban area can use its land, facilities, capital leverage, and human resources in a manner that advances its development. BUILDING A CAPACITY FOR URBAN INTELLIGENCE Given the differences among urban areas described in Chapter 2 and the complexities of urban development in an advanced economy, each area needs its own strong research and information capacity that is linked to its decision-making process. A wide range of information should be available for strategy making, including economic, social, political-gov- ernmental, and physical-environmental data (Perloff, 19814. These data should be collected and analyzed over time to provide the basis for an urban intelligence system. The objective of an information system is widespread self-knowledge of an area by its leaders and its people. Its communities, businesses, and interest groups need to understand the way in which their economy de- veloped, how it functions, how it is changing, and how national and international forces affect its fortunes. From this knowledge an under- standing can develop of the area's assets, its comparative advantages, its vulnerabilities, and the opportunities that are most likely to be within reach. Most areas have some parts of such an intelligence system, but the components are scattered among government agencies, businesses, uni- versities, and nonprofit groups. While the deficiency in strategic infor- mation can be ameliorated by a special consultant or a civic task force study, such ad hoc efforts, however thorough, are soon out of date. Developing a solid base of economic, social, and physical information about an urban area is a continuing task. No major city or region now has an institution to monitor the local economy, to report regularly on its analysis of conditions to forecast ~nr1 to provide advice to policy makers on economic development strategy. As a result, local economic development activity is characterized by many projects but relatively little strategic sense of where the area is headed and whether that is the most desirable direction. To some degree this confusion is illustrated by the major development projects under way in the 10 largest U.S. cities during 1982 (Venture, 19821. Some of these projects have obvious strategic importance by strengthening downtown or , , _ , _ , _

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154 Rethinking Urban Policy satellite service centers. What is impossible to assess is the net effect of a single city's projects on the structure of the local economy. This situation suggests the value of a system to monitor such projects and assess their actual impact on the economy, so that the information gathered could be used in planning future projects. In conjunction with a development program, a few key investments in an intelligence system in strategic locations may help reshape a city's appearance and economy and initiate a process of growth and adjustment. Good information is more important for sectoral and labor market plan- ning in a time of slow growth or structural transformation than in a period of rapid growth. The great differences among urban areas, based on their roles in the urban system, suggest that they must become more selective in the promotion of economic activities rather than continue traditional boosterism, with its eagerness to accommodate any kind of development. Most cities, even those command and control centers in which services have a strong propensity to concentrate, now need to be concerned with not only how many jobs are created and the number of square feet of commercial space or the number of housing units built, but also what kind of jobs and units are being provided, where they are located, and how they contribute to the long-term future of the city. Particularly where major shifts in economic functions and structure are occurring, it can no longer be taken for granted that a city will continue its historic role in the urban system. In an important sense, the city itself must be redefined in terms of the functions it can perform best in a restructured economy (Knight, 1982a). This requires an in-depth understanding of the history and evolution of the region and the metropolis, its businesses, labor force, capital plant, amenities, and cultural and social institutions. Such an inventory of assets and realistic potential provides an essential base for redefining the area's future (Perloff, 1982~. It may reveal, for example, that change in the structures of the old-line industries that dominated the employment patterns of the region in the past now makes those industries an insecure base for the future economy. Other parts of the economy, however, such as the area's cultural, health, and educational institutions, may have substantial capacity for growth and for attracting other economic activities. It may also reveal that headquarters and producer services are replacing the pro- duction of goods in the older industries, thus shifting the occupational structure without changing the industrial mix significantly. A close ex- amination of the local economy may identify firms that are particularly innovative, and even more important, existing or potential linkages among innovative sectors that can produce demands for other services or man-

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Fostering Local Institutions to Manage the Transition 155 ufactured products (Rees, 19831. Such findings would commend the use of local resources in different ways than if the analysis concluded that the same industries and occupations have a bright future if facilities and production processes are simply modernized. This kind of information may also help in making decisions about the need for a different mix of public services, investments in facilities and amenities, and changes in the location of activities or in the transportation and communications systems. Organizing the Intelligence Function An Urban Council of Economic Advisers The experiences of cities and metropolitian areas that have made rea- sonable progress in developing research and information systems suggest the ingredients of a sound urban intelligence system. At the outset, an assurance of long-term funding that is not restricted to the interests of particular sponsors is important in providing both independence and a consistent effort. A permanent high-quality professional staff with enough independence from political interference to allow it to develop a reputation for objective, thorough, and insightful analysis and good channels of access to government, corporate, and community decision makers can provide a valuable resource that improves with time. It develops a re- spected institutional memory, deepening its own and the public's cumu- lative understanding of what is happening to the area, and becomes a valued source of in-depth knowledge and judgment about the area, its economy, and people. Finally, there is a need for a system of publication and wide dissemination of findings and proposals. Groups such as the Regional Plan Association (New York), the Metropolitan Fund (Detroit), and the Greater Washington Research Center suggest different ways of organizing to perform some of the functions outlined here. In a few cities a governmental office, such as the planning agency, may be able to provide a large part of this function. In most cities, however, a government agency will lack the credibility necessary for the private sector to accept its findings. A public-private or independent, nonprofit endeavor may be a more effective way of organizing the urban intelligence function. Greater co- operation and sharing of information among government, business, uni- versities, and volunteer organizations can mutually benefit each participant. One model that could be tried is an urban modification of the Council of Economic Advisers. Such a local council, with members appointed by

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156 Rethinking Urban Policy the public, private, and independent sectors (see below), could be made responsible for a regular report on the state of an area's economy. Such a council could make an annual state-of-the-area report. If supplemented by the creation of a forum for discussion of the themes of this report, the council could, over time, have a considerable effect on public and private economic strategy. The report could be institutionalized, for example, by an event in which government and business leaders must respond to its findings. Public-private task forces could be organized to pursue and carry out its recommendations. While no single model can fit all cities, the objective is to develop and maintain an analytical and information group that can speak with authority on strategic economic development issues and can become a resource on which government and business can rely for unbiased information, thoughtful analyses, and evaluations of public and private activities. Such organizations need a continuous infusion of new ideas, because what served well in the past may not work under new circumstances. This suggests a need for some kind of national network, linking individual urban information systems and various centers of national and international urban research. One model that might be explored is the Cooperative Highway Research Program of the Transportation Research Board. It is a clearinghouse that provides a network of users with technical infor- mation. Reports could be circulated not only to members of the network, but also to executive and legislative leaders at each level of government and to leaders of business and nonprofit orgnizations. Improving the Quality of Regional and Urban Data The federal government can assist in the development of the urban intelligence function in several important ways without intruding directly into the often delicate and unique local processes of establishing and maintaining it. The federal government can improve the quality of the information that is available to such groups, in particular, the quality of regional and sectoral statistics. The Bureau of Economic Research, the Census Bureau, the Bureau of Labor Statistics, the Department of Housing and Urban Development, and the Advisory Commission on Intergovern- mental Relations, to mention only a few agencies, collect and analyze various kinds of information essential to public and private decisions at the regional and local levels (Davis and Wolman, 19811. These data need to be available for regional analysis in a consolidated and consistent format that helps tell a more detailed and accurate story about what is occurring in urban areas (Garnick, 1982; Ingraham, 1982). A new breakdown of data on economic sectors, particularly the services,

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Fostering Local Institutions to Manage the Transition . c" is needed that is relevant to the analysis of urban economies. Within metropolitan areas, there is a considerable need to have data organized by major jurisdiction, including large municipalities. The U.S. Department of Housing and Urban Development has sponsored some useful research on developing a system of urban indicators.2 Work on an urban indicators series should continue, but it should be guided by an interdisciplinary panel of experts and users. Developing an indicator series will require the involvement of the agencies that collect data of interest to urban policy makers and strategists. Among other things, there is a need for reconciling data bases, improving the definitions used, and developing a common format for reporting urban data. The first task should be to develop a consensus on a few statistical series that could help describe major changes in urban economic conditions. This work should proceed independently of efforts to devise formulas for the distribution of federal grants. Reorganization of the way in which economic data are reported, for example, could help considerably in understanding changes in local eco- nomic structure. Another problem that needs to be addressed is how data are aggregated at jurisdictional and metropolitan levels, keeping in mind that what is adequate for national and state analysis is sometimes virtually useless in local analysis. A second form of federal support for local information systems is tech- nical assistance. Federal agencies already provide a great deal of direct assistance in interpreting information and establishing local information systems. Over the last three decades, the federal government has directly assisted in establishing many local, state, and regional planning and in- formation agencies and processes.3 One result of the federal planning requirements and subsidies is the development in many urban areas of sophisticated and well-used policy information systems that use nationally collected data, such as the decennial census data, supplemented with local surveys and other data. The quality of these systems, however, is very uneven. I For a survey and analysis of data that are available on the service sectors see Economics Consulting Service (1981). 2 Much of this work is related to the development of indicators of "distress" for use in targeting federal assistance programs, with a heavy emphasis on fiscal conditions, poverty levels, physical deterioration, etc. A bibliography of urban indicator studies can be found in Government Finance Research Center (1982). 3 These include state and local planning assistance, economic development agencies, urban development organizations, intergovernmental clearinghouses for federal grant programs, and coordination processes for many specific grant programs, such as those for transportation and sewerage systems.

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158 Support for a National Urban Information Network Rethinking Urban Policy Federal comprehensive planning assistance has been terminated. While it may no longer be necessary to provide federal financial support for local planning information systems, there is considerable value in some federal support, in cooperation with private funding sources, for a national net- work to facilitate the exchange of information and mutual assistance among local information agencies. While a number of options are available for providing a national support institution for local economic information and development activities, the most obvious approach would be to strengthen the existing organizations of governments, professionals, and officials, operating through an existing or new consortium but one expanded to include private sector groups such as the Committee for Economic De- velopment and the Urban Land Institute. PUBLIC-PRIVATE LEADERSHIP There is some possibility that public-private partnership will become the nostrum for the 1980s that community participation was for the 1960s. Without claiming too much for it, a close relationship between government and the corporate community is indeed often a critical factor in the success of both individual economic development projects and in the ability of a city or a region to improve its economic position over time (Committee for Economic Development, 19821. Clearly, a substantial economic de- velopment effort necessarily requires the use of power and resources by both sides of the political economy. Some 15,000 local economic development organizations already exist in the United States, including public, private, and mixed groups (Levy, 1981~. Very few of these, however, are involved in developing and man- aging a strategic approach to local economic development. We know relatively little about those that are, how they operate, and their degrees of success or failure. The Commission on Private Initiatives (the Verity Commission), however, has compiled valuable information on partner- ships. Some institution should maintain and analyze such information, providing valuable assistance to local efforts. Strengthening public-private leadership requires two elements: (1) increasing the involvement of private sector leaders in making long- term strategic decisions and (2) involving nongovernmental institutions in carrying out those decisions through specific projects.4 Involvement of private sector leaders and institutions not only provides more experienced

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Fostering Local Institutions to Manage the Transition 159 Judgment to policy making, but it can also increase the legitimacy of economic development programs and help develop alternative policies and alternative ways of approaching problems. Public-private cooperation cannot be wished into existence, particularly in making strategic choices. Nor can it be willed into being by legislation. Of two cities in the same state operating with similiar powers and political processes, one may have a flourishing process of public-private strategy making and action, while in the other city the two sectors maintain at best a mutual sullen disrespect. For strategic partnerships to take root, there must be a favorable civic culture (Committee for Economic Development, 1982:11~. This usually entails some tradition of civic involvement and responsibility by corporate executives. It often means a political climate in which officials and corporate leaders can openly collaborate. The cor- porate leaders must view the government as competent and as reasonably honest in its dealings with investors; public officials must see corporate leadership as public spirited and as a potential ally rather than as a dedicated adversary. In short, there must be a climate of continuing trust as opposed to one of transitory need. Differences in Public and Private Perspectives Each side must understand that its interest cannot be advanced alone as effectively as it can be with the cooperation or support of the prospective partner. The recent experience of Cleveland illustrates the importance of an understanding of mutual interests. The city was brought to the edge of financial default by open antagonism between the mayor and the corporate community. A new mayor set out to work with the business and financial community to improve the city's fiscal and economic position and the climate for businesses and investment in the city. Both sides found sub- 4 There is not a great deal of systematic analysis of public-private cooperation or of the conditions on which it depends. The existing literature consists largely of anecdotal materials, case studies, and exhortation. The richest examples of cooperation tend to be those involving physical de- velopment projects, although there is a growing body of information about social programs, particularly those focused on neighborhoods and employment. Useful case studies are found in Foster and Berger (1982). Several other examples are summarized in Council for Northeast Economic Action (1980). The development of social action programs through private and non- profit institutions can be found in Woodson (1981). A wide-ranging discussion of nongovern- mental initiatives in community programs may be found in the essays and studies in Meyer (1982).

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160 Rethinking Urban Policy stantial benefits in the new arrangement, which has produced a new fi- nancial plan for the city and a major effort to improve its infrastructure. A productive relationship also depends on appreciating the substantial differences of interest and of decision-making processes between govern- ment and corporate leaders (Foster and Berger, 19821. Public officials must respond to jurisdictional constituencies and clientele under sanction of both politics and law. Corporations are usually primarily concerned with narrower or more specialized groupsstockholders, employees, cus- tomers, and suppliers in a national or international rather than a local context. These interests are likely to be sharply focused and clearly un- derstood by the corporations's officers.5 Public officials are less likely to have so clear an impression of their mandates or to find them nearly as stable over time. Government is often encumbered from making quick decisions by constitutional or statutory requirements for public partici- pation, by conflict of interest laws, and by requirements for procedural fairness. Multinational corporations, moreover, have internal strategic concerns that may be clearly at odds with the civic impulses of their executives. Increasingly their executives are not homegrown, they serve relatively short terms of office, and they may spend more time out of town tending to branches and subsidiaries than they spend at headquarters. These differences in institutional behavior can lead to misunderstanding and mistrust of government by business executives accustomed to making decisions in the corporate context and out of the public eye. The fact that everything the mayor does is everybody's business, especially that of the local media, can also be a problem. Businesses frequently fear that adverse publicity will harm sales. Branch office executives are particularly cautious about activities that might provoke the concern of their corporate superiors. The Importance of Stability Not only must the partners be mutually trusting and regarded as reliable, but it is also important that the relationship be perceived as stable and that it directly involve the people who can make binding commitments for both sectors. In this regard the personality and leadership qualities of incumbent officials are important to a successful relationship. It is also useful for each group to be able to endure over time, even though the specific members change. The most effective partnershipsthose con- s We note, however, the salutary growth of the corporate responsibility movement. An instructive example is the Minnesota 5 Percent Club, sparked by the practice of the Dayton-Hudson Cor- poration of donating 5 percent of its pretax earnings to charitable activities.

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Fostering Local Institutions to Manage the Transition 161 sistently used as shining examplesare in cities such as Baltimore and Pittsburgh, where the same basic business and political leadership structure has been maintained for over two decades. While mayors have changed, as have corporate boardrooms, there has been relatively little change in the composition of the interests represented or in the core group of leaders (Fo s ler and B erger, 1 9 8 2 ~ . Finally, it is worth pointing out that it is in such cities that the basic partnerships have survived changes in government administration and pe- riods of great urban crisis, such as the riots of the mid-1960s. Most cities were able to form temporary alliances between public officials and busi- ness, such as the Urban Coalitions, in the aftermath of the riots, but those organizations have since dwindled to levels of ineffectiveness; many have disappeared entirely. It takes more than fear to build a lasting strategic relationship. Much of the recent literature emphasizes the importance of private sector cooperation. That is altogether appropriate, but in the enthusiasm for private sector participation, it is important to remember that public lead- ership is normally the catalyst for partnership and is indispensable to its success. Public leadership usually focuses on the mayor or manager, but where it has been successful there is a deeper institutional base that includes planning and economic development agencies. These institutions must have the resources and leadership to work with private institutions to offer a vision of a more promising future for the community and the admin- istrative, fiscal, and legal skills to translate concepts and visions into development projects, jobs and education programs, and other facilities or services. In many communities it may be useful to combine planning and economic development efforts to strengthen the ability of both to advise the city's leadership and carry out its decisions. The federal government has historically been an important force in encouraging the creation of planning and economic development agencies and processes. To a considerable extent, federal planning assistance was the seed corn for these agencies. Direct federal support is no longer a necessity in most large cities, but continued encouragement of well-thought- out development plans as a requirement for federal support of projects remains an important way of encouraging the development of local insti- tutional capacity. The Autonomy of the Urban Area Another important ingredient in an effective public-private relationship is the autonomy and power of the city in the urban system. Autonomy involves the ability to make decisions that are binding and the ability to

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162 Rethinking Urban Policy commit resources whether money, time, or talent to agreed-on activ- ities. It implies accessibility to other resources and power centers. These include banks, state governments, federal agencies, other firms, the media, and local institutions and organizations such as neighborhood associations. This kind of autonomy for both partners is most likely to be present in the command and control centers.6 Other places, however, have made remarkable economic transforma- tions. Lowell, Massachusetts; Stamford, Connecticut; and Akron, Ohio, need careful study to identify the factors and processes that made their changes in function possible. This is particularly important because the urban areas that will have the greatest difficulty in coping with change are not command and control centers. Autonomy appears most likely to be absent on one or both sides of the potential partnership in subordinate centers, particularly those specializing in manufacturing. Government centers also tend to have a weak and diffused corporate sector because they house few national corporate head- quarters and rely more heavily on consumer-oriented smaller businesses and some business services. The more fruitful partnerships appear to be based on a relatively equal division of power, with a strong mayor or manager often a key actor. There do not seem to be many outstanding examples of cooperation in cities with reputations of either business or political machine domination.7 Models for Partnership There is no standard model for the formation of strategic partnerships, only clues in the experiences of a few cities. Pittsburgh, Baltimore, Dallas, and Denver illustrate how such partnerships have evolved and suggest both the range of organizational arrangements and the limitations on policy involvements of such partnerships in the formulation of economic devel- opment strategy. Pittsburgh's Allegheny Conference is one of the oldest corporate com- munity leadership organizations in the country. It developed from the realization by a relatively close-knit group of corporate and banking ex- 6 The case studies of public-private cooperation used by the Committee for Economic Devel- opment in its study of partnerships were chosen for their effectiveness. All were command and control centers (Foster and Berger, 1982). 7 Strong political machines do not, however, preclude such arrangements. Where the business community is also strong and independent of the machine itself, the ability of the partners to cooperate may actually be enhanced. See the case studies of Pittsburgh and Chicago in Foster. and Berger (1982).

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Fostering Local Institutions to Manage the Transition 163 ecutives that major reinvestments by their companies in Pittsburgh were essential to both the city and to the future of their own headquarters functions. The conference developed a plan for the redevelopment of the "Golden Triangle" and participated in rebuilding this important part of the central business district. The combined power of major international corporations, regional banks, foundations, state and local governments, and federal urban renewal and transportation funding set a pattern that many other cities have tried to emulate (Steinman and Tarr, 19821. Baltimore has followed a similar pattern of cooperation. Although its corporate community is neither as cohesive nor as autonomous as that of Pittsburgh, Baltimore has had strong financial institutions and a large number of community-oriented business leaders. The Greater Baltimore Committee had its origins in the work of a more broadly based civic organization, the Citizens' Planning and Housing Association. Much of its success can be attributed to a talented executive director and a series of mayors with whom excellent working relationships were maintained. It was able to develop a consensus plan for the private development of Charles Center, which has served as the keystone for much of the rest of Baltimore's urban reinvestment program. The city government has taken the principal leadership role in the revitalization of the city, with the Greater Baltimore Committee lending support and some of its members playing key roles, either in government or as developers and financiers of other projects, such as the Inner Harbor (Lyall, 19821. A quite different model for cooperation in the formulation of long-term strategy is represented by the Goals of Dallas program. Initiated in 1964 by Mayor Erik Jonsson, it has involved over 100,000 people from many parts of the community in identifying problems, issues, and objectives for the development of Dallas. A policies plan as opposed to a land use plan, the goals program has provided a corporate and governmental agenda for developing the infrastructure system, the higher-education system, and other elements (such as the international airport) to help Dallas become a "prototypical post-industrial city" (Claggett, 1982~. While Goals of Dallas has been a showcase for partnership, another, less publicized in- stitution has been of great importance in the development of the Dallas economy. The Dallas Citizens Council, consisting of the chief executive officers of the major corporations located in the city, has been a means of reaching consensus within the corporate leadership on major community issues (Claggett, 19824. In Denver, corporate and development interests formed the Denver Partnership, which has produced a development plan for a major sector of the central business district. The partnership has worked closely with local government and has also developed ties with residential communities

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164 Rethinking Urban Policy that are located adjacent to the commercial development area to ensure that the negative spillover effects of commercial district revitalization are ameliorated or even produce instead beneficial effects. The Denver ex- perience is interesting since it started with a more sophisticated under- standing of the need to reach agreement with many groups in producing a successful development program with broad community support. It also shows some promise of being clearly oriented to a vision of the future economy of Denver and the other centers of economic activity in the Denver region, based on the operating characteristics of the economic role of a major regional center. THE INDEPENDENT SECTOR In earlier chapters we pointed out that the nonprofit organizations the so-called independent sector have been one of the fastest growing parts of urban economies. This is a greatly varied sector, ranging from major educational and health organizations, philanthropic organizations, and re- search institutes, to storefront service centers, community organizations, and volunteer groups. In many cities the independent sector funds or operates a large share of the complex of libraries, theaters, museums, health facilities, and cultural centers and programs that are increasingly important in the economic development strategies of urban areas as well as in enrichments to community life (Salamon, 19831. In addition, non- profit institutions often serve as catalysts for bringing public and private sectors together through specially created mediating organizations. They provide a means of conducting experimental, high-risk urban development and service programs that could not be supported by government or op- erated as profit-making enterprises but are necessary precursors of major changes in other institutions and programs. Seed Capital for Transition Our focus is on that part of the independent sector often referred to as philanthropy: foundations and grant-making institutions. These institutions are often significant sources of the capital necessary for many urban projects and for support of the operations of other nonprofit organizations. The central economic advantage of philanthropic investments is that they do not require an economic return to the investor. This allows them to be an almost exclusive source, other than a few government grants, for high- risk activities. Foundation funding can also be blended with private sector capital and government funding to reduce risks.

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Fostering Local institutions to Manage the Transition 165 This seed capital can be especially important in dealing with the eco- nomic transformation of communities. Neither government nor employers provide much transitional support for families, as distinguished from sup- port for the worker in the family. While the worker may receive unem- ployment benefits, counseling, and retraining from government or industry programs, the burden of providing family counseling or crisis centers tends to be left to others, such as churches and organizations supported by individual and institutional philanthropy. Yet these services may be almost as important in overall transition strategy as job retraining and unemployment benefits. Programs to mobilize parents and neighbors can have great impact on programs designed to keep young people in school, to enhance the strength of educational programs, or to revitalize a neigh- borhood. Particularly in the most deprived areas of our cities, such self- help programs often need some stimulus and some capital. Both are often provided by local or national foundations and corporate gifts. Such initial funding is important even when public funds may be available for the day-to-day operation of such groups. As important as independent sector capital is, there is no realistic like- lihood that it can supplant public support for mediating nonprofit insti- tutions (Salamon and Abramson, 19821. What it can do best is provide a base, in addition to public funds or patronage, for the existence of such groups. Philanthropy also has much greater latitude to experiment and- which is important to fail. The expectation that philanthropy should replace public funding for many community programs undermines one of the most valuable contributions that philanthropic institutions can make: the ability to experiment, to seed new enterprises and ideas. To the extent that this source of capital is siphoned off to support operating expenses of established day care centers, community improvement organizations, health clinics, and job training programs, less money is available to in- troduce new ideas or create new ventures that may prove to be more effective ways of tackling urban problems. It is also important to remember that federal funds have been major sources of support for many nonprofit organizations and have in fact helped stimulate the growth of the inde- pendent sector as an alternative to the public sector as the sole provider of many urban services (Salamon, 19831. The Catalytic Role Not only can nonprofit institutions often provide the neutral ground on which government and corporate leadership can meet and negotiate but private grant makers may also occasionally provide the initial earnest money needed to make the other two sectors take a matter seriously.

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166 Rethinking Urban Policy Programs such as the Kettering Foundation's Negotiated Investment Strat- egies suggest one way in which the independent sector can aggressively play a catalytic role in urban economic development. Such programs as the Bedford-Stuyvesant project in New York City, funded by the Ford Foundation, offer other examples of how the investment and catalytic powers of the independent sector can materially affect urban life and economics. There are many less well known and far less expensive ex- amples, such as the Local Incentive Support Corporation, supported by foundations and businesses to fund local development corporations. An- other example is the work of the Greater Cleveland Foundation with the Rand Corporation and the Urban Institute to analyze local economic and infrastructure problems. In Washington, D.C., the Greater Washington Research Center was able to assemble a distinguished panel of business and community leaders to examine the long-range fiscal issues of the region's local governments. The decision of the Kansas City Association of Trusts and Foundations in the late 1 960s to concentrate philanthropic resources on the development of medical education and services in the metropolitan area has had an important and lasting effect on the local economy. Several local foun- dations have been the moving forces behind changes in public school administration, curriculum, and programs. The Mott Foundation in Flint, Michigan, has devoted substantial resources over a long period to the improvement of community services and education, including the devel- opment of community schools. Each of these programs has focused at- tention on an important problem, and the initial foundation investment has had a strong multiplier effect, attracting other funds. The Need for Cooperation From the perspective of urban economic development strategy, how- ever7 one of the difficulties with private philanthropy is that it often is independent almost to the point of being oblivious to the cumulative and supplementary effect of its investments. In many communities this in- dependence arises from the fragmented nature of philanthropy. Philan- thropic resources reside not only in the few large foundations with substantial staffs of specialists who can review programs for their probable effect but also in the trust departments of banks and in the hands of family members administering relatively small charitable trusts within very strict limitations set by their founders. Even relatively unrestricted philanthropic efforts of a community are highly fragmented. Rivalry among the givers is, unfor- tunately, not infrequent.

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Fostering Local Institutions to Manage the Transition 167 Where cooperation has been possible, however, the effectiveness of philanthropy in a community has been considerably enhanced. Community foundations have been established in a large number of cities, making possible the consolidation of the decision-making process for investments, if not the actual funds available for distribution. Particularly during periods of economic hardship or transition, the focusing of philanthropic capital would be desirable. An added advantage of the community foundation is that it provides a legitimate and convenient conduit for corporate donations that protects both the giver and the beneficiary from a variety of problems. Community foundations can often attract strong community leaders to their boards, and they can usually afford permanent professional staff, making their programs less subject to idiosyncratic choice by a single director or trustee. Developing some process for coordinating the activities of the independent sector should be a high priority for urban areas. Whether through a community foundation or some other medium, focusing phi- lanthropic resources can be a powerful tool for a strategy of economic development. Developing Institutions In our discussion of managing the transition to a new kind of economy, we have repeatedly stressed the importance of staying power. While trusts are distinguished by their continuity, they are frequently afflicted by an equally distinguishing ingredient a lack of direction or constancy. A laudable interest in experimentation can sometimes be transmuted into an almost random search for innovation. While a number of foundations have begun to fashion annual or longer-range programs to guide their grant making, these are often stated in such general terms as to be virtually meaningless. Program emphasis changes with fads, in order to stay current. This kind of serendipity often produces start-up grants and no follow- through. There is often too little appreciation of the fragility of many kinds of urban activities and the need to distinguish between programs that are single shots, those that should be expected to generate new sources of support, and those that are worthwhile but require a continuing com- mitment for support. The proliferation of foundations, exceeded only by the growth in applications for support, understandably makes such insti- tutions cautious in making long-term commitments. It is hard to quarrel with the seed-money thesis in most instances. There are, however, exceptions that should be recognized, particularly in the development of urban institutions. The urban intelligence system discussed above illustrates the point. Such systems need to be professional, continuing, and independent to play the role suggested for them. But it

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168 Rethinking Urban Policy is almost impossible for an institution to continue if it is independent of its sponsors. If it performs well it is almost certain to alienate some of its public or private sponsors, either in diagnoses of economic problems, evaluations of past policies, or forecasts of future conditions. Both con- tinuity and independence could be enhanced by continued, reliable support from local foundations as the only disinterested source of support. There is, moreover, a value to local philanthropic institutions themselves in the intelligence system because the information and analyses it produces can be employed in making grant policies. Small business and community development corporations are another example of institutions that may need continuing support for a longer period than some foundations consider. It takes time to be effective, especially when seeking to change deeply ingrained patterns of economic or social behavior. Ineffectiveness is virtually guaranteed when staff and board energy is almost completely devoted to institutional survival. All of this speaks to greater selectivity in the first instance, based on a clearer sense of what is strategically important, then a commitment of sufficient resources to make a difference instead of a splash. LESSONS FROM EXPERIENCE The experiences of public-private partnerships, philanthropy, and the independent sector suggest that public-private leadership in devising eco- nomic development strategy can be direct or indirect, depending on the civic culture of the city or region. Strategies can be the initiatives of a power elite, if it has a traditional base of legitimacy in the community. Or it may be necessary or desirable to pursue a consensus strategy through a more broadly based process. Elite-centered systems have been effective in dealing with redevelopment of central business districts and thus in moving the diversified service centers in which such partnerships are located toward a more rapid adjustment to a service-centered economy. The private development organizations that have represented corporate leadership have worked well in tandem with public development agencies. Development, largely that involving land investments, is an area of public policy that is congenial to large corporations, which are concerned often for their own facilities or for other land uses that are of interest to them such as hotels and convention centers. The use of public condemnation powers and the availability of public financing for infrastructure, land, and leveraged loans provides an atmosphere of clear mutual advantage for both partners. The advantages of the elite-centered approach to economic development strategy are less clear when neighborhood revitalization or employment

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Fostering Local Institutions to Manage the Transition 169 issues are involved. While some corporations have been actively involved in neighborhood revitalization and job training programs, specially created hybrid organizations are often needed to actually carry out these programs. This simply reflects the fact that not all corporate interests converge in all areas of public policy. Also, unlike development projects, neighbor- hood and labor market programs often involve more conflicting interests than are represented in the classic partnerships for downtown development. Unions, community organizations, minority groups, churches, and small businesses must frequently have strong representation. In these areas of public policy, specially tailored groups are often critical to give the pro- gram legitimacy as well as the necessary constituencies. The strategic concern is to equip the state or local government and the catalysts whether they are foundations, leadership coalitions, or spe- cially created local development corporations with the ability to foster the appropriate matches. These matches may consist of direct involvement of individual corporations, as in the Jobs for Delaware Youth program, which is developing a secondary education program related to specific jobs in cooperation with the public school system. Such a strategy may mean working with a major corporation, such as the Control Data Cor- poration subsidiary, City Venture Corporation, which has developed a major emphasis on urban facilities, jobs, and entrepreneurship through its direct activities and its profit-oriented technical assistance to small inner-city businesses. What is important is a regular process for continuous dialogue between the government, corporate, and independent sectors. This process can be used to develop and test strategies and to undertake or initiate specific tactical actions. These might include setting up and providing seed capital for a community development corporation, creating a capital pool for home or commercial improvement loans, or developing a youth employ- ment program. Strong consideration should also be given in an overall economic de- velopment strategy to the use of the private and independent sectors in improving the delivery of public services. Corporate leadership can be especially useful in advising local government on fiscal issues, in sup- porting bond issues for the maintenance or construction of facilities, and in providing advice on management systems. The key problem is to involve the corporate community in such issues before they become crises that threaten both the fiscal capacity of local governments and private invest- ments. At another level it is useful to identify those services that might be provided more economically through contracts with established firms or by encouraging the creation of private and nonprofit neighborhood firms

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170 Rethinking Urban Policy to provide services under contract to the city. The government, in con- sultation with the private sector and other interests, should identify those functions that could usefully become private ones (Committee for Eco- nomic Development, 1982; Savas, 19821. In addition to simply turning services over to private enterprise, urban areas should examine the possibilities of improving some services through ending public monopolies in such areas as public transportation, hospitals, refuse collection, and even some aspects of public safety. By creating competitive service systems, whether through profit-making firms or com- peting public or nonprofit entities, people can have more choices, and some market discipline can be introduced into local public services (Kold- erie, 19821. SUMMARY The creation of local institutions to manage the transition of urban economies can follow no standard format. Local civic cultures, interjur- isdictional politics, and the composition of leadership in the private and independent sectors are all important factors. Many of the nation's com- mand and control centers already have well-established, public-private leadership systems. Some have long experience in urban development issues. These need little federal or state support beyond general encour- agement and improvements in information systems. Where a good base for cooperation does not exist, as seems likely in many of the subordinate centers, a more active state or federal role may be appropriate in fostering the formation of public-private partnerships. State government in particular may be helpful in enlisting the cooperation of state-headquartered corporations, banks, and utilities in encouraging branch managers to become involved in urban development strategies. The state also may be helpful through its planning and economic devel- opment agencies in providing technical assistance to local governments who may be hard pressed to hold up their half of a partnership or to participate effectively in it. The independent sector can also play a sig- nificant role in helping to establish community leadership organizations and acting as a catalyst to bring other sectors together. Federal support through provisions of leverage capital and infrastructure funds is often the indispensable ingredient in making a partnership possible in resource-scarce communities. Federal encouragement of long-term co- operation as a condition of various funding programs also could be helpful, and active federal participation is needed in the development of better information systems.