Cities have long been seeking out companies to relocate to their business-friendly confines. By dangling tax breaks and other incentives, cities hope to boost the local economy, provide employment, and add to the property tax base. More recently, it seems, companies have been searching for cities that will be amenable to their workers, particularly the younger employees — millennials — who favor walkable urban centers with a healthy mix of nightlife and arts venues as opposed to the suburban house with the yard and the garage for the obligatory car.
Now, says Bruce Katz, co-author of two recently published books, “The Metropolitan Revolution” and “The New Localism,” cities and metropolitan communities have more power than they may realize to shape their own destiny, particularly at a time when federal and some state governments are stepping back from the roles they used to play. Katz believes that the companies’ quest to find an amenable city is not just because their bright young workers prefer to live in such an environment. It’s also because urban centers are where many companies — particularly technology companies — need to be to benefit from both competition and collaboration with other similar ventures. The fact that the so-called millennials prefer these urban environments is a happy coincidence.
“The jobs base is changing. The innovative economy wants a level of density and interactivity,” Katz says. “That’s why there is a renewal of interest around academic and scientific institutions. There’s a location preference of companies. It’s not just the people preferring to live in a vibrant downtown, that’s walkable, etc.
“In the 20th century the big corporations had their big research parks, where you could keep your secrets secret. But that’s not the way it works anymore.”
Some people were writing cities off as dead in the 1970s, when GE left its Manhattan headquarters for a suburban campus in Fairfield, Connecticut. But then two years ago GE announced it was heading back to a city location, in Boston. When GE moved from Fairfield to Boston, Katz says, “people talked a lot about that being a case of talent attraction. There’s no doubt that Boston is a lot more attractive city to sell to prospective employees than the middle of Connecticut. But GE is also a company that is a platform for innovation. The scale, density, and nearby incubators of a city attract a platform company. The way companies are thinking about innovation today is totally different from the old Bell Labs approach.”
Katz will be the keynote speaker at New Jersey Future’s Redevelopment Forum on Friday, March 9, at the Hyatt Regency in New Brunswick. The day-long conference will give participants a chance to rethink many issues related to the vitality of the state’s urban centers.
Organized by New Jersey Future, the Trenton-based nonprofit founded in 1987 to promote “sensible growth,” fight suburban sprawl, and “foster vibrant cities and towns,” the Redevelopment Forum begins with the premise that the state “is at an inflection point. A number of our cities and towns are experiencing a promising comeback, with redevelopment and new business activity invigorating once-struggling communities. However, the state’s economic recovery from the Great Recession has lagged that of most other states, and stubborn, chronic problems remain. High housing costs, crumbling infrastructure, a neglected transit system, and the increasing vulnerability of our coast and towns to climate change all threaten to impede the state’s resurgent competitiveness and diminish residents’ quality of life.”
Panel topics include promoting an innovation economy; paying for aging stormwater infrastructure; creative solutions for affordable housing; making communities “aging-friendly;” and even the potential legalization of pot, in a panel called “Ensuring Marijuana Regulation Is Equitable and Beneficial.”
A panel on “Adapting to the Retail Revolution” reflects the belief that much of the country is now “over-retailed,” with Internet sales cutting into sales by traditional retailers. The big shopping malls are facing the additional loss of millennials who prefer living in-town rather than relying on a car in the suburbs. That shift is putting further economic pressure on many car-dependent shopping centers that had been located near major highways. The panel “will discuss what traditional downtowns can do to capitalize on new demand and new ways of shopping, and what suburban shopping centers can do to adapt to the changing landscape.”
And one panel will be on the millennials themselves. As the program for the forum notes, “millennials are becoming our next leaders and taxpayers. Yet research shows millennials are leaving New Jersey. . . How can communities turn themselves into the lively, walkable places millennials desire?”
The challenge of keeping the millennials is a big one in a state like New Jersey. As Katz says, “New Jersey is still a suburban state in an increasingly urban world. New Jersey has to rethink that.”
From Katz’s point of view, strategies for redevelopment do not depend on some broad reaching edict from Washington or Trenton or any other state capital. Individual cities, Katz believes, have the capability to transform themselves into the kinds of living and working environments that will be attractive to both high tech companies and their brightest employees.
As cities rediscover their potential, much of their emphasis, says Katz, has been on “placemaking,” enhancing the state of their public spaces, improving their infrastructure for pedestrians and bicyclists.
“I presume that New Jersey has many small suburban municipalities with great bones — town centers, older architecture, traditional street grids, transit connectivity. The key to quality placemaking is the activation of places through frequent programming, food markets, arts festivals, and the like.”
Little things can indicate that a town center is succeeding with millennials. As Katz writes in “The New Localism,” the number of young college graduates living within three miles of the city center “has surged” in cities that are undergoing this transformation. In Chattanooga, Tennessee, for example, “the number of residents living downtown has doubled and locally grown coffee shops (probably the best new metric for urban vibrancy) are plentiful.”
Successful placemaking can pay off. Katz refers to a 2012 Brookings Institution study by Mariela Alfonzo and Christopher Leinberger (author of “The Option of Urbanism: Investing in a New American Dream”) that measured commercial and residential real estate values in the Washington, D.C., metropolitan area. Real estate values increased as neighborhoods became more walkable, where commuting and everyday needs could be met by walking, transit, or biking. The authors devised a five-step “ladder” of walkability, from least to most walkable. On average, each step up the walkability ladder added more than $300 per month to apartment rents and nearly $82 per square foot to home values.
“The New Localism” refers to placemaking but offers more strategic advice on governance and capital formation — how to initiate and pay for all that placemaking.
“The real challenge for a place like New Jersey is how to think, plan, innovate — and the interplay of all this,” Katz says. Unlike states or the federal government, he says, cities are not just governed, they are also networked — “co-governed by institutions and private leaders. The state and federal governments are still highly specialized. But cities have global connections.”
Katz offers an example: “If you were to ask a state government what’s the best response to traffic problems, they might come back and tell you that the roads have to be widened. If you went to a city and asked the same question you might get 25 different answers. There’s a broader aperture.”
In “The New Localism,” Katz makes the point that cities are not broke. While officials (and residents) in many cities are fretting — understandably — over annual budget deficits, they often ignore the value of their capital holdings. “We are still operating with legacy institutions from the 20th century,” Katz says.
A challenge for cities, he says, is to “find new sources of capitalism — public capital. Copenhagen, for example, is a well off city now but it wasn’t always. Copenhagen transferred land that was government owned to a publicly owned, privately managed management association. The city said you have to optimize the use of this land and use the money you make to fund a 21st century subway system
“If New York City had had an entity like that instead of the Port Authority of New York and New Jersey, then a good portion of its debt on the subway system would be a lot less.”
Even the most challenged cities may have more resources than you would first think. Last year Trenton was one of the 232 cities vying to host Amazon’s proposed new second headquarters. While Trenton was not one of the 20 finalists, it did have some assets that other cities did not — specifically vacant, publicly owned land that could be set aside for future development. A private owner dealing with Amazon might not be so patient.
“It’s a mechanism that’s not being used much strategically in the U.S.,” Katz says. “It’s being used more in Europe. It’s a smart use of public assets, one of our top three.”
Katz refers to a recent post he and co-author Jeremy Nowak wrote for CityLab, an online forum begun by the Atlantic magazine and focused on urban issues. “We believe cities can leverage the public assets they own (e.g., land and buildings in downtowns and along waterfronts) to invest at scale in critical public goods like infrastructure,” they write. “The Copenhagen model represents a way between mediocre public management on one hand and unnecessary privatization on the other.”
The other two ways to make cities more financially competitive, as presented by Katz and Nowak:
“Cities must organize private and civic wealth. Our book is full of examples of cities that have used private and civic resources to advance key community objectives, such as spurring entrepreneurship or catalyzing redevelopment of critically located neighborhoods. . . These models work because they deploy corporate, philanthropic, and university resources through professionally managed entities that have clear missions and work in close cooperation with the public sector.
“In the near term, cities might even want to create Social Impact Funds and convince local corporations to channel a portion of the tax windfall they are poised to reap for investment in tax credit projects that build affordable housing, restore historic properties, and rejuvenate local business districts.
“Voters must support concrete projects and initiatives. The referenda process, where it exists, is a path to large-scale investment in the future. Over the past three election cycles, for example, voters in cities and metropolitan counties have approved hundreds of billions of dollars for infrastructure investments ranging from transit extensions to rail station redevelopment to road modernization.
“Ballot initiatives passed in Broward County, Dayton, King County, and San Antonio are generating hundreds of millions of dollars in local revenues to provide children with high-quality early education and other proven investments in young adults,” Katz writes.
Born in Brooklyn, Katz attended a public high school that enabled its seniors to spend their last half year in school working in the real world. Encouraged by his politically aware parents (a lawyer and a schoolteacher), Katz chose a position in the public sector, with the New York City Council. After studying urban history at Brown, Class of 1981, Katz earned his law degree at Yale.
Katz served as chief of staff to Housing and Urban Development Secretary Henry Cisneros in the Clinton administration. In 1996 he became co-director of the Brookings Metropolitan Policy Program. In 2008 he co-led the housing and urban issues transition team for the Obama administration. At the Brookings Institution, a centrist think tank, he focused on urbanization and advised leaders on public reforms and private innovations to promote metropolitan areas.
Katz has just left Brookings to start a new company, New Localism Advisors, with his co-author of “The New Localism,” Jeremy Nowak, a visiting fellow at Drexel’s Lindy Institute for Urban Innovation. Katz, currently living in Washington, plans to relocate to Philadelphia, where, he says, “we will be helping cities organize private and public wealth.”
Thanks to the recently enacted Trump tax law, Katz believes, financial challenges for cities just got more urgent: “How are cities going to fund the future?” he asks.
As he and his co-author wrote in CityLab’s online publication, “cities stand to absorb a major financial hit from the new legislation. For the most part, the substantial reduction in corporate tax rates will mean fewer resources at the federal level to invest in those things — research-inspired innovation, quality infrastructure, skilled workers — that drive long-term economic competitiveness. The corporate tax rate reduction also has the effect of devaluing federal tax credits that have been used to raise private capital for low-income housing, historic preservation, and research and development.
“But tax reform is only the latest in a long series of fiscal challenges that localities have been dealing with. For the past several decades, higher levels of government have systematically pushed down responsibilities for solving hard challenges and making critical investments without providing a concomitant delegation of capacity or resources.
“Capital, in this country at least, is not the constraint. With the right mechanisms, hundreds of billions of dollars are out there to be raised and deployed.
“The conventional wisdom is that cities are broke. But that’s because we think of cities as governments and we focus on what they owe, given pension and other liabilities. As we write in ‘The New Localism: How Cities Can Thrive in the Age of Populism’ this narrow view of cities constrains our ability to see the multiple opportunities for raising capital. We see cities, firstly, as networks of institutions and leaders and, relatedly, as communities that have vast market and civic power that can be tapped.”
“One final thought: We have no choice. In the absence of a functioning federal government, investing in America’s future will have to happen from the bottom up.”
An intriguing and positive note to Katz is that many of these city-based issues cut across political party lines. Conservatives and liberals, for example, can agree on what needs to be done to shore up a city’s failing infrastructure. He has even written about how a potential new political party — call it the Metro Party, the people in it the Metropolitans — could build a coalition to bring about policy changes to improve the viability of cities.
Amazon’s recent request for proposals from cities hoping to become home to the company’s second headquarters — HQ2 — could be seen as another example of cities trying to undercut each other in a lose-lose bidding war of tax breaks and other incentives. But, Katz says, “with Amazon it’s not just the taxes. Amazon really wants a great community, with mass transit already installed. The city that wins the process will have that eco-system already in place. That will trump tax abatements.
“But how do you move forward if you don’t get the Amazon offer? I just spent two days in Miami and that’s all people were talking about.”
The competitive criteria that Amazon listed in its RFP are the same elements that will attract both millennials and the companies that hope to hire them. “Amazon is celebrating urbanity,” Katz says. “That wouldn’t have happened 10 years ago.”