South African Cities Network
South African Cities Network.
Report of Economic Development Training
Johannesburg April 2003.
By Greg Clark, London, UK.
gregclark@
South African Cities Network.
Report from Training Workshop. March 31st to April 4th 2003.
Towards a Strategic Agenda for SACN: report from Greg Clark.
1. Introduction.
The South African Cities Network organised and hosted a 4 day training workshop for economic development officials and leaders from South African cities in early April 2003. 40 City Economic Development Officials form eight South African cities, 1 elected Councillor from Buffalo City, and 3 guests of SACN attended the training workshop 31st March to 3rd April 2003. About 25 of these attended the whole programme, which lasted for 4 days.
The training programme was facilitated by Greg Clark form London, UK. Greg Clark is both Executive Director of the London Development Agency and Chairman of the OECD Forum of Cities and Regions. He is practitioner in Urban Economic Development and led the workshop in a practical manner focussing on key issues in defining and implementing economic development programmes at the city level.
2. Content.
The content of the training workshop was designed to be flexible to the needs of the participants and was developed alongside the participants. The overall aim was to tackle key issues in city economic development with a strong focus on delivering effective interventions. The course covered:
i Presentation of the SACN mission and work programme.
This session covered the work programme of the SACN and, in particular, the model of the City Development Strategy to which the SACN is working.
ii Initial review of successful economic development in South Africa and progress within South African Cities.
This session included an informal review of the successful elements of local and city economic development in South Africa. Each delegate identified a successful initiative they had seen and described it’s main features.
This session helped to demonstrate that there is a wide range of successful economic development initiatives already in place in South Africa, and that it is important that these initiatives are well disseminated.
iii Review of the impact of globalisation on city performance and urban economic development processes.
This session was in the form of a presentation and discussion drawing upon a background paper that had been prepared for the training programme. The presentation covered a review of 20 year changes in urban economic development practices and the influences of the main processes of:
Industrial restructuring.
Globalisation (especially trade and continental economic integration).
Technological development.
Public sector reform.
The paper is included as appendix 1 to this report.
iv Stock-taking of how economic development in changing in South African Cities.
Delegates undertook a review and discussion exercise about economic development is changing in South Africa. The major themes that emerged were:
Municipal reform has changed the focus of economic development.
Economic development is a more complex activity than previously.
The goals of economic development are more diverse and unsettled, some are contested.
Economic development is now more strategy led.
There are many more diverse strands to economic development now, including sector strategies, inner city redevelopment, promotion and marketing efforts, and poverty alleviation programmes.
Officials and elected councillors are becoming separated by a gulf of professionalisation.
Review of working relationships between city officials and elected leaders in South African Cities on economic strategy and programme issues.
The delegates undertook a review of how officials and elected councillors need to build their relationships in the context of changes in the economic development process.
v. Review of factors of productive/competitive cities and base-lining of South African cities.
This exercise reviewed a list of 19 key features of productive and competitive cities that was assembled as part of a review of European Cities for the European Commission. Delegates were asked to score and rank the importance of each of the features, to add other features that they though important, and to comment on the performance of their cities in respect of the features identified.
(The questionnaire and rubric is attached at appendix 2).
The features that the cities ranked as most important included:
Strategic transport and IT connections to markets and good internal connectivity.
Talent/skills of labour force.
Crime rate.
Vision, leadership, and strategic decision making capacity.
Cost base of cities.
Inclusive and diverse society.
Promotion and Marketing of the City.
There was widespread debate about which factors were most important and why. Very few cities viewed any of the features as unimportant, and most agreed that it depended upon the starting point and wider context of the city. However, most also agreed that there were clearly strong features of city competitiveness that lie largely outside of the domain of economic development programmes and of city government widely.
The next exercise then asked the delegates to consider how city government could influence the factors focussing upon the key roles of city government and the tools it can employ. (Appendix 3). This gave rise to a wider ranging debate about how city government can use it’s influence to achieve economic development outcomes without delivering direct programmes. A major focus concerned how city governments need to work effectively with Provincial and National Government partners.
vi Detailed case study of Metropolitan strategy in London, UK.
In the next session a detailed case study of integrated economic development and spatial planning was presented focussing upon the London Region in the UK. This presentation highlighted a wide range of important issues including:
▪ The world city challenges of growth with inequality.
▪ The spatial planning for growth around transport nodes.
▪ The need for investment to manage growth effectively.
▪ The spatial development influences at continental, national, regional, metropolitan, and municipal levels.
▪ The purpose and character of economic development strategy.
▪ How economic development is organised, especially the flow from Economic Strategy through to Business Planning, Target Setting, and Implementation.
(This presentation includes a large number of graphics and can be circulated separately).
A major theme to come out of this session was the importance of building and maintaining a supply chain of capable organisations that can manage and deliver economic development programmes.
vii Site visits within Johannesburg and Peer Review.
This session focussed upon a study tour of central Johannesburg to review the inner city redevelopment activities being undertaken for the city by the Johannesburg Development Agency. These included Constitution Hill, Blue IQ, New Town Square, Market, and others. The session was introduced, prior to departure, by two delegates from Johannesburg. It was stressed that the projects to be seen represented a small part of the Johannesburg economic development efforts, and that they were principally catalytic projects focused on creating the incentive for re-investment in the central city following widespread disinvestment by the commercial sector.
A series of key questions were set to help shape the analysis of the projects (appendix 4).
In the peer review session the following day the issues raised and discussed included:
How far was Blue IQ (A Provincial Initiative) consistent with Joburg 2030 (The City Strategy) and the IDP?
What link did these catalytic inner city redevelopment projects make to poverty alleviation?
How were local traders and entrepreneurs engaged in the initiatives?
Overall, there were many lessons to learn form these case studies and the way the peer review was undertaken. It appeared very important to properly locate the initiatives within the framework of economic development activity at the city level and to provide detailed briefing notes on the projects, or wider case study of the whole city into which the review could be placed.
viii Presentation of South African Cities economic strategies and programmes.
In this session each of the cities gave a 15 minute presentation on the economic development progress of their city referring to the key features of a competitive city previously discussed. This was very useful session for delegates and much appreciated by all. There is clearly a strong desire for a wider sharing of experience between the cities, but on amore focused level.
ix Presentation and discussion of six International case studies.
In this session six international case studies of economic development at the city level were presented and discussed. The case studies focused largely on issues of how economic development is managed at the city level (annex 1) and provided insights about rather different ways to ensure that economic development is delivered effectively. Each case study highlighted issues of poor practice as well as good practice, and the importance of learning from what does not work well was underlined. The six cities were:
London.
Glasgow.
Berlin.
New York.
Toronto.
Miami.
The main conclusions for the case studies were discussed by the delegates in small groups and reported back.
x Review of the roles of a wide range of stakeholders/partners in city economic development programmes.
This session returned to the theme of working in partnership with other organisations and sought to build up a picture of which key organisations City Governments need to work with to deliver economic development impacts. A range of economic development programmes were considered and these focussed on the different roles and contributions of key partners. Appendix 5.
xi Review of modes of organising ED within cities and metropolitan regions.
This was discussion session in which different approaches to organising economic development activities within cities were discussed. Particular emphasis was placed on how to achieve better management of economic development, especially how to make national and provincial programmes more effective in the cities.
xii Review and discussion of Scenarios for South African cities in 2008, including the networking needs.
In this session the delegates worked in 3 groups to consider alternative scenarios for how city economic development might evolve in South Africa in 2008 and how city officials might need to respond. The 3 scenarios offered a high, medium, and low road in terms of economic context and public policy backdrop. Each included some common features such the winning of the staging of the 2010 world cup (soccer) and the opportunities this would present. (Appendix 6).
The delegates quickly noted that all the scenarios offered both challenges and opportunities, and it was important to reshape their city economic development initiatives in line with these. All were asked to produce practical strategy, and some were more ready to do this than others. Most were able to devise some important economic development initiatives that they would try to promote.
xiii Review of issues for the South African Cities Network.
The final session offered an opportunity for review of the training workshop and the issues it had provoked. These are summarised below in section 5. A review of the original programme was undertaken. (appendix 7). An evaluation of the training was conducted by the SACN, and these were passed confidentially to the SACN staff.
3. Style of workshop:
Overall the style of the training was participative and interactive, and sought to involve all the delegates actively in the learning, recognising they had most to learn form each other. The session focussed on practice rather than policy and was supported by extensive materials, aimed at relationship building amongst the cities. The overall tone set for the training was challenging and honest. Learning from bad practice and failure was a key aim and major theme.
4. Evaluation:
Delegates competed an evaluation which is under the control of SACN staff.
5. Trainer’s Initial View:
The trainers view of the workshop includes the following key insights:
The delegates were largely excellent and able people, and often of much higher calibre than might be expected elsewhere. They were also very committed to their own development and learning, which is an important asset.
There is a lot of good practices emerging in South African Cities and these practices need to be written up and well disseminated.
On average the delegates were stronger on policy/strategy issues, and more variable on implementation, organisation, and management of economic development.
Economic development is becoming a more specialised set of tasks in South African Cities and there were more specialists, and fewer generalists on the training programme. This suggest that there is both a need for more specialised training on key themes and also a continuation of general training that can benefit everyone.
Economic development is at very different starting points within the cities. This is a strength, and much can be built upon it, but it does mean that training, advice, and other forms of support have to be carefully crafted to avoid being targeted too precisely or too generally.
There are distinctive issues of scale and capacity and experience across the cities. In some cases, cities which have had larger economic development departments are now downsizing, others with little track record, are growing rapidly. This suggests that cities will remain heterogeneous for some time in terms of what they can do. This suggests that national government will need to helped to consider what kinds of initiatives will genuinely help cities.
There is no common language yet, about what economic development is, or is for. Although this is emerging, it is not necessarily coherent. Different meaning are ascribed to words, false distinctions are being made between rather loose terms, and some terms which are merely descriptive are taking on philosophical meanings which are not well shared or understood. It is important to clear this up. What is at stake is real clarity about the goals and purpose of pursing economic development at the city level, this clarity is needed if wider investment in cities is going to be achieved.
City Officials and elected leaders face challenging roles in delivering economic development in South African cities. There is clearly a drive for more sharing and learning, but also a strong desire to ‘fix’ and settle key aspects of the external environment which can be settled. This speaks to the importance of achieving a settled set of relationships and roles with Provincial and National Government.
Different models of implementation are emerging in South African cities. Three obvious models are:
Departmental Model: Strong economic development department within city government.
Corporatised Model: Implementation spread across many departments of city government.
Agency model: Large aspects of implementation out-sourced to special purpose vehicles largely owned by cities.
Partnership model: Significant activities managed by third parties not within the city governments ownership.
These approaches are not mutually exclusive. More important is to learn the strengths and weaknesses of each model in order to provide some guidance on how to make each work, and what it works best for.
The economic development activities appear to be highly influenced by formal processes of strategy making and planning, such as IDPs, CDSs, Longer term strategies. This is good and important and a necessary step. However two concerns emerge:
There was really little evidence that these strategies are genuinely owned by other key stakeholders (Provincial and National government for example) and therefore they can become a false strategy, where there is the pretence of resource mobilisation around key priorities, only to find that there are as many resources going into activities which contradict the strategies. This is not an issue of ‘enforcement’, but rather one of how strategy is developed and leadership is exercised. The second concern is that several of the delegates showed quite marked misunderstandings about the power and authority of strategy, and were unable to respond to scenarios or situations where strategy was ignored. This suggested to the trainer that one problem may be that some of the delegates really need more practical grounding in the real politique of inter-governmental relations, public affairs and influencing skills, etc.
6. Initial key dimensions for a Strategic Agenda for SACN:
From the training workshop, 6 key themes emerged in terms of taking forwards an agenda from the training. These themes emerged separately from the work undertaken by SACN to prepare its economic development work plan. However, these themes do support the main propositions in that plan as presented on April 4th, and they add some nuance and specificity in one or two places.
6.1 Learning with and from each other.
Key goal: build-up and promote the common language, knowledge, and know-how of the cities in city development.
Key steps:
Concept paper, terminology, glossaries.
More training on key economic development themes (specialist and generalist).
Work with elected councillors on their role in economic development/productive cities.
.
More site visits and peer reviews within South Africa, with a more defined methodology.
Bringing wider range of people within the cities together, economic developers and planners, and educators, and housing, and property, etc etc.
6.2 Influencing and shaping Provincial and National Government and International Agencies.
Key goal: Help make higher tier policies work much more effectively in South African Cities.
Building a dialogue with all Provincial Govs and key Departments of national Gov on the economic agenda.
Help align Macro, Micro, and local/city economic policies so that they are reinforcing and can be more effective.
Create a common agenda amongst international agencies for SA Cities.
Create transparent modes to allocate resources to cities wherever possible.
6.3 Strategic Joint Projects for South African Cities:
Key goal: build collaborative capacity amongst the cities on unique and distinctive projects.
Pick a single initiative to focus on for a city network collaboration on economic development benefits.
e.g.
Inward Investment
Tourism and Cultural Initiatives.
World Cup 2010.
Follow up to world summit.
6.4 Promoting South African good practices and engaging with international networks..
Key goal: tell South African City stories well to wide-ranging audiences and learn from other cities on a selective basis.
Preparation of detailed case studies of economic development in some South African Cities.
Promoting South African practices internationally.
SACN could provide access to international networks:
Recommended for SACN:
OECD LEED Programme.
Brazilian Cities Network.
INTA.
Indian Cities Network.
Also of some interest:
IEDC.
ICMA.
EUROCITIES.
Etc.
Reviews of twinning relationships for SA Cities, and their economic benefits and opportunities. Develop of good practice guidance on how to make twining economically effective.
6.5 Working with business community and media.
Key goal: build a pro-city network of business people and media commentators in South Africa.
Business: joint dialogue on urban investment issues, and urban success in South Africa.
Media; perceptions of South African Cities. Good news stories, and media ‘touch stones.’
6.6 Management and Implementation Capacity.
Key goal: foster managerial and organisational capacity across and within all cities in the network.
Devise and introduce a management and implementation capacity audit tool for the cities.
Advocate with cities and sponsors for needed new capacity.
Advocate for Universities to run specialist ED training, eg MBA ‘Economic Development’ courses.
Ends.
Appendix 1.
South African Cities Network; Economic Development Training.
The Impact of Globalisation on Local Economic Development: A Practitioner’s Overview.
Greg Clark Executive Director, London Development Agency, UK.
Chairman, OECD Forum of Cities and Regions.
1. Introduction.
I am delighted to be coming to South Africa to work with you on developing skills, insights and principles concerning urban economic development in a global economy. For me, as a practitioner and practical advisor in local economic development there are some key challenges to which local economic development must respond. I take these to be as follows:
▪ Global economic trends and dynamics are, on their own, insufficient to ensure that policy goals of social cohesion and economic development are achieved at the local level. Indeed, global economic trends and dynamics are likely to contribute to an aggregate worsening of local social and economic conditions in the majority of localities without concerted action. Without effective interventions globalisation will make many cities more polarised.
▪ Global economic integration will work best when coupled with investment in local capacities to add value to external investment, so that these investments can perform better in both commercial terms, and from a local development/public policy perspective.
▪ Investment in local capacities needs to be a goal of local, national, and multi-national policies if the global economy is to succeed. There are clear lessons to be learned from existing programmes, such as those of the European Union and OECD, in how to make a long-term investment in local development capabilities, in the face of economic internationalisation.
▪ Achieving the right combination of globalisation and devolution requires a dedicated role for national/federal governments and multi-national institutions in consciously building the capacity and expertise at the local level to manage and shape local development effectively.
My contribution to this debate is as a practitioner in local economic development who is concerned to ensure that we are learning well from the international practices of doing and managing local development. I believe that implementation is the key variable, rather than policy or strategy. By this I mean that I am most interested in the factors that help us to achieve policy goals at the local level, and how we deal with the factors that might prevent their achievement. This is a distinctive discussion from that concerning what the policy goals are or should be. In local development terms, there is a broad set of debates about the goals, but very limited discussion of the means required. (This is especially true when countries and continents are encouraged to borrow or copy policy initiatives from elsewhere).
This sometimes creates situations where sophisticated and clever policies and strategies are put together, but there is no real effort to deliver them, often because capacity to implement is absent. It also occasionally creates the situation where policy and strategy is very limited, but robust and courageous action at the level leads to some good outcomes being achieved. There is no direct link between having good local development policies, and having the ability to achieve them. The capacity to implement local development has to be carefully built. This point has been made very clearly in assessments of how local development capacity has been built in the EU, in comparison to the NAFTA countries. It concludes rightly, in my view, with questions about how we are to proceed, rather than a further discussion of what is needed.
I want to encourage an international observatory and a new science on what effective local development implementation really looks like. The OECD LEED Programme is already taking significant initiatives which should be of interest in South Africa. I want to make some comments in this regard.
2. Explaining local success in the global economy.
No one city or locality is uniquely successful, and yet there are clearly economic trajectories that some have achieved which outstrip the performance of both their national economies, and the main trends for their regions, or do better than other cities with apparently similar assets and opportunities. What is it that has made Barcelona faster growing than Valencia, or Frankfurt more than Cologne, or Atlanta more than Birmingham, or Sydney more than Melbourne?
National economic policies across the world are converging. The growth of world and regional trade arrangements, shared currencies, and external fiscal disciplines agreed with multi-national investors, fuels this convergence, leaving less to chose in pure policy terms between different countries as sites for investment. Local leaders are realising that the greater locational differentiation may now be possible at the sub-national level. Cities and metropolitan-regions might exploit their natural assets and investments in distinctive ways, ways which provide a significantly enhanced platform for commercial success and job creation, relative to both their basic trend rates, and to some other cities and metropolitan regions.
The mandate to encourage local leaders to pursue local economic development objectives continues to grow. Localities and cities may be able to differentiate themselves from one another in ways which nations, and federations of states, now find much more difficult. They may achieve very differentiated economic performance, and therefore provide distinctive investment opportunities which offer returns not easily available elsewhere.
This assumes that different localities and cities must have some distinctive and diverse assets and opportunities in economic development terms, and it also assumes that they might have relatively coherent and effective means to promote their own advantages and to be pro-active in ‘setting out their stall’ in the international economy. Many are doing so, but are all equally capable of participating, and of succeeding? They may have the territorial assets and goals, but do they all equally have the necessary territorial development tools and means?
Current debates remind us that without such means local actors may find it very difficult to lead their own development process. Over the past 10-20 years there has been dynamic growth of the efforts to promote local development in most of the developed world. Not all of the developments tend in exactly the same directions, but there are now few absolutely fundamental differences of philosophy.
As an overall framework, it is clear that local economic development now takes, as a starting point, dynamic macro-economic change. Indeed the beginnings of active economic development promotion in many developed countries can be traced back to much wider processes of de-industrialisation, massive technological change, or continental economic integration (OECD). It is recognised that the larger drivers of change have recently tended to have highly divergent sub-national impacts (OECD). Recent economic history has given a particular emphasis to the internationalisation of the economy, and its relationship with a new global trade regime and trading blocks (with shifts in the global geography of supply and distribution chains), the evolution of new generation ICTs, widespread public sector reform and de-centralisation, and large scale (mainly pro-urban) demographic shifts.
These together have combined to accelerate sub-national economic differentiation, and to trigger the re-organisation of the economic functions within, and between continents, nations, cities and regions. Some localities, cities and metropolitan regions have faced substantial problems, and some have gained significantly. Overall, the world is becoming more urban as a consequence, and de-urbanisation in the developed world has been reversed. Global processes have had discernable differential local impacts. Cities and Metropolitan regions have been re-established as fundamental economic units, and some have learned how to do better than others.
In this context, some of the key dimensions of local economic development have become more clearly visible, and definable. It is now possible to state that a key aspect of local economic development is about local attempts to manage and shape economic change positively, and to be pro-active in doing so. Essentially such efforts are trying to position their locality to benefit from the new demand side drivers in the international economy. Local development may look, to the un-initiated, like a series of ambitious but disconnected projects and programmes to help (for example) workers, small firms, and land adjust to new crises and opportunities. But, in this context, local economic development is fundamentally a change, risk, asset and relationship, management activity undertaken within a territorial framework.
Local economic development efforts must recognise and articulate the dynamic external contexts in which a local economy is operating and seek to actively manage and shape them, bringing forward improved supply side responses at the local level and to negotiate a better deal for the locality, and it’s people, in doing so. Whilst National and Federal Governments pull the macro-economic levers, local economic development attempts to make interventions at the sub-national level which can enhance the beneficial (or remediate the negative) impacts of the macro economic trends and the higher tier policies.
Local economic ‘management’ is at least as important now as local economic ‘development’, meaning that localities, cities and metropolitan areas have to manage their economic environment and important ‘client relationships’ with existing key industries and investors, as well as with workers, and consumers, and individual firms, if they are to make the most of macro changes and militate the risks it brings. This is why local economic development has shifted much more towards strategic management functions in the past two decades, and rather less on the simple chasing of key outcomes (eg individual FDI deals). This in part is reflected by how the organisation of local economic development has changed from being a departmental activity within Local Governments to also being a civic leadership and partnership activity, with many stakeholders involved, and capable development agencies managing it.
But these changes in how local economic development is implemented have an important echo in other discussions. Many people observe that globalisation has made local development a different kind of task; more complex, more challenging, and in some ways more dangerous or risky. They identify correctly, that this creates a significantly enlarged mandate to invest in local development capacities if the global economy is to be a partner rather than an enemy of local development.
3. A Distinctive Activity of Local and Metropolitan Governments.
Consequently, economic development is rather different from many other activities of Local and Metropolitan Governments. For example, it is not like many municipal service functions where units of service delivery and performance can be easily and adequately monitored and measured (eg provision of sanitation services). It is about influencing market based processes and activities, by positioning the locality effectively to address them, not simply about delivering public services (though some key services are a key part of any locality’s economic development offering). Equally, Local Government is very rarely a monopoly provider of all the ‘local’ things that economic development needs to embrace.
This is a key reason why local development agencies are established as partnership vehicles. For example, local utility provision, banking and investment services, higher and vocational education, trade and tourism promotion, crime prevention, and many others can be key aspects of local economic development, but are not always delivered directly by Local Governments. This means that there is often a requirement to build alliances, new implementation vehicles, and/or both, in order to achieve any coherent economic development strategy delivery.
Last year, I undertook a national analysis of the roles of Local Government in economic development in the UK, looking to the future. We tried to assess in a considered manner what the unique contribution of local government needs to be. After all, in many developed countries there are other organisations that could deliver local development activities (chambers of commerce, universities, civic groups, etc). [i]The assessment identified 8 key rationales for the Local Government role, the most fundamental of which was the need for accountable and far-sighted leadership. Because local development is about managing risks and relationships, setting priorities and mobilising resources, negotiating with external and often powerful partners, a robust local mandate to perform those tasks is required.
An important recent development in local economic development has been the recognition that it is fundamentally about taking a view of the locality’s potential and actual offering as a location, from the point of view of various key economic and social stakeholders. For example, a locality can repeatedly ask: what is our actual or potential offering as a location for jobs, workers, incomes, consumers, firms large and small, investors, asset holders, tax revenues, donors and lenders? Asking these questions consistently, and seeking to answer them well, brings insights and perspectives that are often otherwise absent in municipal thinking. It can remind the local players that the local business environment does need to be actively managed, and this is a key component of local development.
A typical example of this approach concerns the pursuit of ‘business retention’ programmes by many local governments in Europe and North America. Many localities now understand, better, that successful businesses spend 80% of their marketing effort keeping and expanding the value of the client base they have, and only 20% of their effort seeking new clients. So too with local economies. Successful cities and localities now spend much more of their effort liaising with existing business investors to find out how those businesses, and their networks of suppliers and key collaborators, could be helped to expand, and to learn about any perceptions their businesses have of weaknesses in the way the local business environment operates.
Whilst Foreign Direct Investment (FDI) remains important to localities, it is recognised that a pre-condition of having successful and enduring FDI is the effective management of business retention and expansion at the local level. FDI and business retention are complementary, not alternative, policy goals. Importantly though, a business retention and expansion programme is likely to lead a locality to systematically address ‘product improvements’ in the local economic environment much more than FDI efforts which will often be more shaped by ‘marketing’ efforts. To follow the line of reasoning, a locality that is focused on improving it’s local economic environment will have more leverage in negotiations with global investors.
4. Good governance and metropolitan/municipal reform.
Local economic development efforts frequently highlight the imperative of aligning economic geography with administrative/governance geography at the sub-national level. Many of the interventions that economic development strategies might seek to encourage have optimal impact at the level of the functional sub-national economy (often a widely defined metropolitan region). This is often an overlapping series of market-based spaces. For example, a labour market geography bounded by acceptable daily travel to work distances, an acceptable supply chain distance for a smaller company, a user-geography for logistics facilities and infrastructures such as a major train station or an airport. These are some of things that add up to a functional sub-national economy. (In Europe and North America this would now normally be called a ‘regional’ economy, but I understand that in other settings the word ‘regional’ often refers to larger sub-divisions of continents).
Few of these sub-national economies usually have a governance system that covers all of the included areas. This creates fundamental challenges for local economic development because it increases the scope for unintended negative consequences arising from local development activities. Substitution, spill over effects, displacement, dead weight etc, can occur. Meaning that the local economic development interventions are likely to have impacts across the whole functional sub-national economy, and any notion that these effects (jobs created, procurement decisions, etc) can be captured solely within certain administrative jurisdictions is fanciful. For these reasons, local economic development has been a strong driver of, or imperative for, metropolitan/municipal reform processes, and local economic development strategies developed at the metropolitan level have been better informed by a clearer understanding of detailed economic geography.
Metropolitan reform processes have also therefore enabled a series of local administrative units to share the costs of the key local economic development infrastructures from which they all benefit. A good example of this is the growing range of Metropolitan Economic Development Organisations where several municipalities will ‘club together’ with business leadership organisations, utility companies, universities, and others to form a metro-wide economic development agency and programme, recognising the fundamental economic interdependence all parts of the region. Dr Marc Weiss (an internationally renowned metropolitan strategy expert) discussed many of these issues with SACN during his recent visit.
5. Roles for National and Federal Governments and Multi-national Agencies to encourage local development.
As we build up this picture of how local economic development is changing, it is important to dwell on the re-calibrated role of national and federal governments and multi-national agencies (and to a similar extent the roles of state and provincial governments). Just as cities and metropolitan regions have started to learn how to adjust to the new international economic order, so they have done so in ways that often reflect changing perspectives and practices at the national/federal level. National macro-economic policy now more readily admits it’s limitations, just as it simultaneously seeks to both reinvent and to pool it’s power in the global context. Many national and federal governments in the developed world have begun to address the renewed importance of sub-national economies by reviewing and updating their policy tools, and this has brought localities, cities and metropolitan regions to the fore.
For example, in the last ten years we have had national urban policy reviews in several countries including Japan, Germany, UK, Australia, Netherlands, Italy and France. Such reviews have taken up many of the themes also addressed by the World Bank in its new Urban Strategy document (and the urban strategies of other multi-national organisations such as the UN and other continental development/investment banks), and several have resulted in new national policies. Fundamentally, these reviews have stated that the big drivers of change are creating a more urban world in which cities are both the most basic form of human settlement, and fundamental units of economic production. As such, cities are seen as offering the principal infrastructures for both economic growth and for social justice.
Cities are places where both must be achieved, and they offer the fundamental assets and opportunities needed to do it. But they need help from higher tier governments that must be calibrated in ways which empower cities and help to create a national system of cities and metropolitan regions which will move beyond the zero sum of inter-jurisdictional competition. This is a redefinition of what local economic development is for. Cities are also the places where de-stabilisation will occur if economic, social, and environmental imperatives are not met.
Additionally, in the past decade we have also had a series of national ‘regional’ policies reviews (again here ‘regional’ is used in it’s sub-national sense). Countries like Poland, Portugal, UK again, Mexico, USA and France have looked at their sub-national economies and tried to put in place some new arrangements to address the sub-national regions. In much of Europe this has resulted in efforts to create and sustain Regional Economic Development organisations/agencies (Poland, Portugal, UK, and others), whilst in the USA it has led to a rather more ‘regional’ focus to national economic development programmes (EDA, HUD, etc even if the financial resources are very small scale) with efforts to encourage more intra-regional co-operation between local development actors. It has also led to a much stronger regional alliances and partnerships (such as the growing number of metro-regional economic councils in the USA).
Two clear policy lines stand out from these reviews and the policies that have followed them:
• Cities and regional economies are now seen fundamentally as economic assets and building blocks rather than as problems and challenges. As a consequence city and regional economic development is much more accepted as a national priority.
• In the context of an increasingly global economy, national policies have shifted to being about helping all cities and regions to do better, rather than simply helping the worse off by seeking to redistribute national economic activity and public expenditure from other cities and regions towards them.
Two clear implications have resulted from these basic policy changes.
• National and Federal Governments (and multi-national agencies) have started to reinvent their role in supporting city and regional economies and economic development.
• City and regional organisations have started to more fundamentally reinvent what economic development is, in order to respond to ‘higher tier’ criteria for greater investment (eg eligibility for European Regional Development Fund in the EU, access to EDA technical assistance funds in the USA, or preparation of an investment programme for World Bank support, such as a City Development Strategy).
There are several ways that these have started to play themselves out, and these need to be fully set out in order to see the full extent of the change process with which we are involved:
• Firstly, the focus of interest has shifted towards finding and defining what the sub-national economies actually are. As more detailed economic analysis has been done at the sub-national level so this has shown how little we actually knew about the local interdependence of places. Old emnities between cities and suburbs, or between two neighbouring cities, or between urban and rural areas, have not disappeared, but evidence is starting to show that they are much more economically inter-dependent (mutually reinforcing) than was previously understood. They cannot ‘go it alone’ but must work across their whole sub-national region to create the tools to ‘steward’ their business environment, promote new forms of employment, deal with image problems, and tackle the limitations of infrastructure.
• Secondly, this changed definition of the appropriate site of local economic action has led to a need to create new vehicles for addressing the new local economy that is seen as the more appropriate site of economic development activities. One result has been a large expansion in the creation of both local economic development agencies and other special purpose organisations and partnerships, many of them working at the metropolitan and neighbourhood levels.
• A third dimension has been the attempts to build new metropolitan governance structures to better address the territorial development imperative that such reviews have highlighted. For example, there have been metropolitan/municipal re-organisations in Miami, Toronto, London, Montreal, Berlin, and Mexico in the past 7 years, and there are many more now planned.
• Fourthly, the goals of local economic development have substantially broadened. They do not now simply include the creation of jobs or the generation of municipal tax revenues. Local economic development objectives now frequently include quality of life/liveability objectives, economic diversification aspirations, incomes and disposable incomes targets, labour market participation rates, business formation rates, productivity and innovative measures, and very precise local investment targets and mechanisms. More is now known about what makes a sub-national economy develop sustainably and this is translated directly into economic development efforts.
6. Changing practices of Local Economic Development.
Another way to view recent changes in local economic development practice would be to look at what a local economic development programme actually does with the resources at it’s disposal. There have been some significant changes here recently in Europe and North America. A brief summary of the shifts would include:
• From crises response to long-term analysis and strategy led interventions.
• From a focus on sites and buildings to a focus on firms, people, and skills.
• From the direct management of individual site developments to a wider role in Mater Planning, setting design standards, organising architectural competitions, and the phased/planned release of land/sites into local real estate markets.
• From hard infrastructure to soft infrastructure.
• From FDI focus to one of building a balanced regional economy.
• From Business Attraction to Business Retention and Expansion.
• From work with individual large firms to increasing work with networks and ‘clusters’ of smaller and linked firms, and supply chains with tradable capacities.
• From focus on tax or cash based incentives (price) to a focus on local product and environmental improvements (quality) and relationship management (customer care).
• From ‘job creation’ initiatives to employment strategies that emphasise income goals, skills enhancement, employment preparation, labour market access, and ‘on the job’ development and support.
• From municipal economic development offices to leadership councils, development agencies/corporations, and public/private partnership.
• From community involvement to community empowerment through asset transfers, community development corporations, and balance sheet strength.
• From a narrow focus on private sector partnerships, to a realisation of need to engage all of public and community sectors too.
• From provision of ongoing subsidies to ‘public sector enhanced’ market based financial engineering and investment instruments.
• From short term to longer-term visions, missions, and strategic goals.
• From ‘stand alone economic development programmes’ to long-term economic development strategies integrated with growth management, public transport and infrastructure, quality public services, good governance, liveability, bankability, community safety.
• From a focus on local development being a job for everyone to an increased professionalisation and more defined niches and roles.
This brief summary of all the changes emphasised in the literature won’t capture all of the sorts of things that local development programmes now do, but it does give an impression of the dynamic changes and learning that have started to occur. One way to summarise these would be to say that local economic development has been integrated into the main flows of public sector reform and reinvention at the sub-national level, and has also started to pick up key lessons from it’s interplay with the private sector.
7. Local Development Agencies and the implementation of Economic Development Strategies.
A major response to the challenges of glocalisation described in Prof Bressi’s paper concerns the creation of Local Development Agencies. Creating an organised vehicle for pursuing local development goals is an option considered necessary by many localities once they realise that local development activity goes beyond the provision of services, and indeed requires local actors to become ‘agents’ in their own future. This is an observable phenomenon in the member countries of the OECD where more than 20,000 such local development agencies now exist. International experience of local economic development agencies is extremely diverse however, and there is no single template or formula for a local development agency. Three basic variables can be isolated to help develop an approach:
• The nature of the challenges faced in the local economy, their complexity, and sensitivity to local interventions. Local economic development challenges are not all the same, even if they increasingly happen in the same global context. Some are amenable to local and regional interventions; others require substantial national and international efforts. Some will respond well to national economic growth, others will see their fortunes diminish whilst the nation prospers. Places (Cities, Localities) have the tendency to go through ‘cycles’ of opportunity and need, not necessarily in sync with the performance of the national economy. Different kinds of local development agencies and strategies are needed at different points in the re-development process.
• The political, financial, and fiscal contexts in which local development agencies are established. These vary hugely from the centralised national efforts in certain parts of Europe in the 1940s and 1950s, to the municipal and business efforts in the rust belt cities of the USA in the 1960s and 1970s, to the wide-ranging establishment of local development agencies in the developing countries of the Asia Pacific region and the ‘accession countries’ to the EU in the 1980s and 1990s. A key variable concerns which tiers of government are the key sponsors of an agency and to what extent financial and fiscal freedoms exist for those tiers. For example, local development agencies that are sponsored directly by national and federal government tend to have much greater financial resources and freedoms than those sponsored by municipal governments alone.
• The inter-institutional settlement (who does what?) in terms of the whole economic development programme for a locality. For example, some local development agencies are ‘comprehensive’, providing, or co-ordinating, all the main inputs to the economic development process at the local level, others are ‘niche’, providing a particular aspect of the process (eg Site Preparation and Master Planning, or Inward Investment Promotion, or Small Business Support and Finance), others still are ‘sectoral’ focusing largely on one key dimension of the local economy (eg Tourism, Sports, or Manufacturing). Many local development agencies have moved from being ‘niche’ towards being comprehensive, some have moved the other way successfully too. An additional issue concerns the links the local development agency has with those who have responsibility for; organising business leadership, advocacy and development of infrastructure, management of public land, skills training and vocational education, housing, and broader international promotion or marketing of the locality.
These three basic variables at the international level provide the backdrop for much of what needs to be considered in terms of international experience of local development agencies. What a local development agency is, and can do, is significantly shaped by the prevailing conditions that exist within these three basic lenses.
Local development agencies are potentially a key mechanism for strengthening local development efforts, they are a source new and additional local development tools. The justifications used for establishing, maintaining, or expanding a local development agency are not always the same. They include the need to create for the local economy an entity which is:
▪ more investor facing and ‘business like’ in it’s style than a municipal office or department, including the ability to negotiate directly with developers, deliver services to businesses, and other actors,
▪ able to respond to a crisis or challenge for which there is no other logical agent (eg the closure of a key site or facilities),
▪ able to focus on the specific needs of an identified redevelopment area,
▪ a new and ‘independent’ (and more flexible) vehicle for partnership co -investment,
▪ capable of integrating the inputs of diverse range of public and private partners,
▪ able to cover a geographical area which has no other ‘ready’ governance structure,
▪ able to fulfil an ‘outward facing’ role for the city,
▪ able to develop more flexible procedures and human resource arrangements,
▪ able to undertake a focussed task over a defined time-period unencumbered by other missions and goals,
▪ able to achieve a legal or fiscal status which will allow it to utilise or develop additional tools and interventions that are otherwise absent,
▪ able to manage a transparent process for delivering financial assistance and incentives to businesses in ways which are not directly politically controlled,
▪ able to share risks and costs effectively across a range of interested parties.
Essentially, local development agencies are special purpose vehicles. Justification for creating them, or enhancing their role, rests upon defining how they could achieve more than is possible with pre-existing municipal arrangements. Working relationships with other local players are also important. There are several kinds of distinctive working relationships that need to be attended to by a local development agency, in addition to it’s own role of bringing key partners together within its structure and constitution. These include:
▪ joint work and co-ordination with other parts of city government (eg, Planning, Transport, Policy, Housing, Estates, Infrastructure, Education, Culture/Amenities/Leisure, etc).
▪ joint work and co-ordination with economic development entities in neighbouring municipalities and regions.
▪ collaborative work with politicians at all levels to give them insights into what the development agency is doing.
▪ joint work and co-ordination with other parts of the public sector in the city (eg Universities, Hospitals, Housing, etc).
▪ joint work and co-ordination with business leadership groupings and other specialist economic development entities.
▪ consultative liaison with community interests and organisations.
None of these are especially easy, but all are important. Much of this relationship management and co-ordination is invisible in terms of the delivery of key programmes of the development agency, and yet these are critical relationships to ensure smooth working. Development agencies have often been set up to be ‘business facing’, yet they need to be ‘partner facing’ and ‘colleague facing’ also. Depending upon the local institutional arrangements, there are various ways to address these priorities. Explicit, planned, and agreed mechanisms for managing these relationships are key, and it should involve the most senior officials from the entities concerned.
There is now a tacit acceptance that most cities and regions need more than one kind of development agency. A good example of this comes from recent US trend analysis. In effect this suggests that most major US cities and metropolitan regions will now have a variety of development agencies covering varying geographies. These will include:
City-wide a single multi-functional economic development agency.
CBD a range of Business Improvement Districts and other targeted efforts.
Neighbourhoods a range of community based development entities.
Metropolitan a regional co-operation/marketing coalition of some kind plus perhaps some technology diffusion entities.
Whilst this is now the typical approach in most larger US cities, it is not necessarily the case in Europe, where regional efforts are more developed and there are fewer jurisdictions within most metropolitan regions, with larger (boundaried) cities at their centre. In Europe we are more likely to find:
City-wide a single multi-functional economic development agency with several specialist agencies working alongside it (eg in SME support).
Regional one main regional development agency operating as a partnership between business and government.
Others a wide range of specialist local development agencies, but not with a statutory strategic remit.
If the use of local development agencies is to spread it is important to better understand how different arrangements work, rather simply to borrow or copy one model.
8. Financing Local Development: a Role for Multi-National Institutions in Leveraging Private Investment.
Leveraging private finance into localities, cities and regions is a fundamental imperative for Ggovernments of all kinds. OECD countries, and their sub-national governments, are embarked on a quest for effective means to encourage private investors to view localities, cities and regions as good places to secure a return on investment. Bankers, fund managers, and investment advisors are taking note. Investments that help local economies to perform better can add value to other localised transactions too, by providing a more competitive platform for business, raising local incomes and revenues, and improving asset values.
Mayors and regional leaders are now advocating local economic development strategies that increasingly seek to perform the role of being ‘investment prospectuses’ for their territories, demonstrating to financiers that they have the ability to grow in ways which can sustain borrowing to support economic expansion, and provide an acceptable return on capital deployed. Some local and regional financial instruments are already able to demonstrate a competitive performance relative to more established investment vehicles. Put simply, more private investment can help a city or region achieve more thant public investment cycles alone can afford, especially in times of tight fiscal discipline. Local leaders and financiers have important business to do together.
It is a key task, therefore, of local economic development activity to make cities and regions both more ‘investable’ and more ‘investment ready’. ‘Investable’ in that they need to clearly demonstrate how good returns can be made on investments in their territory, and be ready to help make those deals attractive. ‘Investment ready’ in that they must become preoccupied with directly helping to stimulate a strong deal flow of good quality propositions for financiers to evaluate. Just as cities and regions still spend significant effort seeking to attract international corporate investments through FDI deals, they now need also to attract institutional and commercial investment into their locally focused financial instruments and assets.
The major changes in global economic development over the past decades have produced a different set of financing propositions at the local level from the past. Economic development in localities, cities, and regions is now much less about roads, bridges, and factories (which are tangible collateral), and much more about re-used brownfield land, high tech space, creativity hubs, science parks, supply chains, knowledge capital, small companies, joint promotion, and community development. These are less tangible collateral. They often offer more variable revenue covenants. Investing ins these assets require something new. The public sector can use its resources flexibly to help the private sector find means to commercially finance this new generation of job and wealth creation activities. National assistance through tax relief and incentives can be coupled with more localised participation in financial instruments to improve returns, or to reduce risks and costs, for private co-investors.
In some places this is happening more quickly than others: Catalan Banks have played a major role in financing the re-development of Barcelona, in New York City the financial services sector has been an important investor in community development successes, and fast growing smaller companies in Australia and New Zealand are seeing their growth supported by public and private capital programmes.
We’ve made some progress in London too. Our municipal pension funds are now significant investors in small capable firms and urban regeneration, our banks are providing patient capital for disadvantaged entrepreneurs, social housing in poor neighbourhoods is regularly financed through private debentures, bonds, and EIB lending, and community development organisations are starting to leverage bank lending for capitalisation projects.
We now know that investment opportunities that are principally territorial (localised) can be competitive for commercial finance when compared against other opportunities in business stocks and shares, government bonds, or other traditional investment instruments. However, there are credibility and profitability gaps, issues of scale and risk, and matters of cost and confidence, that have to be addressed if cities and regions are to attract private investment over the long term. A better flow of good local propositions (allied with clear investment instruments) has to be built if the local investment markets are to grow. Thus localities, cities, and regions themselves can become better at attracting private investment if they will diligently build the basic dimensions of a healthy local investment market. To do this, most localities, cities, and regions need help from their national governments and multi-national financial institutions, and robust advice from partners in the financial services sector.
For those seeking to build local economies, private co-investment can add important ingredients that are otherwise absent. Economic development programmes are increasingly moving away from traditional attempts to substitute for the absence of private investment, and are now more concerned with explicit attempts to leverage private investment instead. Tackling market failure through market making is the focus. Private finance is key to economic development because:
▪ It provides more capital than is otherwise available, more quickly, and more efficiently.
▪ It helps to rebuild local investment markets and averts other ‘disinvestment’ from occurring.
▪ It builds a more sustainable finance strategy into economic development initiatives, allowing public funds to be gradually unlocked for alternative actions.
▪ It creates a greater commercial and professional discipline within economic development policies and initiatives.
▪ It attracts wider interest from other commercial players, giving confidence that something of value must be occurring which might merit their interest.
▪ It re-positions good economic development activity as an ‘investment’, rather than an ‘expenditure’, in the modern economy.
Localities, cities and regions are therefore increasingly in search of the best propositions and instruments to attract commercial investment. Equally, for private finance providers, participation in economic development programmers can provide some important contributions to business strategy. It can:
▪ Utilise public sector support to help develop new business and markets sectors that would otherwise not be easily accessed, acting as R&D activity for future product lines.
▪ Contribute to diversification of the asset classes over which investment is spread.
▪ Contribute to achieving ethical and/or local investment priorities.
▪ Provide some predictable returns in periods of instability.
▪ Build relationships with a wider set of partners from which other business might evolve.
▪ Strengthen local and regional economies in ways which can safeguard or improve other investments, or expand the market for other financial services.
Local and regional governments want to be in business with private financiers, and it is time to learn together about how to do this more effectively. Multi-national institutions have a key role to play. Encouraging local economic development which is focused on attracting and sustaining external co-investment in a robust manner should be a deliberate focus. For example, multi-national institutions can:
▪ Invest in improving corporate and project finance skills at the local levels, especially amongst local development agencies and practitioners.
▪ Invest in creating simple and robust templates for public/private co-investment in local development projects so that propositions can be generated to a ‘model’ which is well understood, is legally tight, and is therefore less expensive to appraise.
▪ Invest in local development programmes which will stimulate the flow of local propositions for external finance. For example ‘investment readiness’ programmes for local real estate or growth orientated SMEs.
▪ Invest in financing instruments that will help off set costs, improve returns, or mitigate risk by supporting good quality projects which are close to market thresholds. Many local development initiatives are able to service external finance effectively, but not be able to provide equivalent returns or security. These are the factors that need to be addressed directly to keep external finance engaged.
Much more could be written on all of these themes. What has been stimulated is an important debate about the future significance of local economic development in the new era. I hope we will discuss some of these issues together in Johannesburg, and develop practical approaches to managing them well.
To contact Greg Clark: gregclark@
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[i] Sharing Future Prosperity, A Survey of the Local Authority Role in Economic Regeneration, UK Local Government Association, 2001.
Appendix 2.
South African Cities Network Economic Development Training.
During the training session I hope we will consider a wide range of issues relevant to city economic development. I want to ensure that I understand some of what you think before we begin. I also want to help you put your experience into a wider context. This questionnaire is designed to help me understand your perspectives and priorities better. If you can fill it in, it will help me to design the training session better and will enable me to show some comparisons of your thoughts with those of European and American Cities.
Please tell me a little about your current role, and how you came to be working in city economic development. Also please tell me why you are coming to the training.
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(Q.1) How important do you think each of these factors is in encouraging the economic competitiveness of South African cities?
In this section I would like you to rank the factors in terms of their importance in explaining the economic competitiveness of cities in South Africa. You should indicate on a score from 1-10 the importance you attach to each the factors in contributing to cities’ economic competitiveness. For example, a score 0 would mean it is not important, 3 relatively important, 5 rather important, 7 very important, 10 absolutely crucial to competitiveness. I know this is a matter of judgment and interpretation. But please enter your score against each listed factor.
| |Score |
|Macro-economic climate. | |
|Strategic transport and IT connections to markets and good internal connectivity | |
|Promotion and marketing of your city | |
|Talent of Labour Force | |
|Availability of land/sites for development | |
|Crime rate | |
|A city centre of National distinctiveness | |
|Nationally and internationally recognised facilities for events | |
|A reputation for advanced research, development and innovation | |
|A reputation for effective governance and efficient services | |
|Sophisticated cultural infrastructure and services | |
|Cost base of your city | |
|A wide range of high quality residential choices | |
|A reputation for environmental excellence and responsibility | |
|An inclusive and diverse society | |
|Vision, leadership and strategic decision-making capacity | |
|Innovation in firms and organisational behaviour in cities | |
|Fiscal incentives available to cities | |
|The impact of national governments policies | |
|Please add any factors you think are important which are not already mentioned | |
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(Q.2) How well do you think your own city perform in terms of these success factors?
The second thing I would ask you to do is to rank your own city’s performance upon those factors on a scale of 0-10. For instance, a score of 0 would mean the city was performing very badly, 3 relatively well, 5 rather well, 7 very well, 10 absolutely excellent.
| |Score |
|Macro-economic climate. | |
|Strategic transport and IT connections to markets and good internal connectivity | |
|Promotion and marketing of your city | |
|Talent of Labour Force | |
|Availability of land/sites for development | |
|Crime rate | |
|A city centre of National distinctiveness | |
|Nationally and internationally recognised facilities for events | |
|A reputation for advanced research, development and innovation | |
|A reputation for effective governance and efficient services | |
|Sophisticated cultural infrastructure and services | |
|Cost base of your city | |
|A wide range of high quality residential choices | |
|A reputation for environmental excellence and responsibility | |
|An inclusive and diverse society | |
|Vision, leadership and strategic decision-making capacity | |
|Innovation in firms and organisational behaviour in cities | |
|Fiscal incentives available to cities | |
|The impact of national governments policies | |
|Please add any factors you think are important which are not already mentioned | |
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(Q.3) Your wider views about your city, and the role of your national government and the International Community.
I am interested in getting your wider views on a number of policy issues in your own city and your own country. The following questions are designed to provide me with some of your views. Again I know it is not easy to simplify things so much. But your replies are meant to help us identify key issues to explore in the training rather than provide complete answers at this point. I hope we will be able to discuss them at the Johannesburg meeting or subsequently. Please give as much information as you can. Greater detail will be most helpful but even brief answers will be valuable.
1) Overall what is your assessment of the current economic performance and competitiveness of your city in relation to other cities in South Africa or across the Southern Hemisphere more generally?
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(2) What key strategies has your city adopted to improve its economic competitiveness?
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(3) What have been the most important achievements in improving your city’s competitiveness during the past ten years?
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(4) What are the three key challenges facing your city in increasing its economic competitiveness?
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(5) Can you identify any particularly innovative projects or processes to encourage competitiveness in your city that other cities could learn from?
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(6) How would you rate the visionary and strategic decision-making capacity in your city? How good are the working relationships between the public, private and community sectors in your city? What good examples of collaboration could you mention?
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(7) How good are working relationships between your city and its surrounding region and authorities. Are there significant differences of interest or conflicts over economic development? Are their good examples of formal or informal collaboration between different authorities?
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(8) How much importance do you think your provincial and national government attaches to the economic contribution of cities to provincial and national economies? Are there any ways in which it has directly helped encourage competitiveness? Or there ways in which it has hindered?
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(9) What changes, if any, would you most like to see in provincial or national policy? This might include – more powers or resources for cities; greater collaboration between national and local authorities; greater national investment in physical or social infrastructure, education and training; more consistency in national priorities. Please add any others you think important.
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(10) Are there any lessons that other city/provincial governments could learn from the policies and programmes of your provincial government?
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(11) What contribution if any has the International Community made to the economic competitiveness of your city? Do you think it could do different things - or the same things better - to increase city competitiveness?
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12) What are the key issues you would like to see covered in the training programme? How long will you be able to attend? What will make it worthwhile for you?
Your contact details:
City:
Name:
Title:
Position:
Address/Institution:
Tel: Fax: Email:
We are grateful to you for taking the time to complete this questionnaire.
Please return by e-mail Greg Clark:
GregClark@
Appendix 3.
South African Cities Network: Roles of City Government in City Competitiveness
|City Competitiveness Factors |Lead role |Support Role |Influence |Partners |
|Macro-economic climate. | | | | |
|Strategic transport and IT connections to | | | | |
|markets and good internal connectivity | | | | |
|Promotion and marketing of city | | | | |
|Talent/Skills of Labour Force | | | | |
|Availability of land/sites for development | | | | |
|Crime rate | | | | |
|A city centre of National distinctiveness | | | | |
|Nationally and internationally recognised | | | | |
|facilities for events | | | | |
|A reputation for advanced research, | | | | |
|development and innovation | | | | |
|A reputation for effective governance | | | | |
|and efficient services | | | | |
|Sophisticated cultural infrastructure and services | | | | |
|Cost base of your city | | | | |
|A wide range of high quality residential choices | | | | |
|A reputation for environmental | | | | |
|excellence and responsibility | | | | |
|An inclusive and diverse society | | | | |
|Vision, leadership and strategic | | | | |
|decision-making capacity | | | | |
|Innovation in firms and | | | | |
|organisational behaviour in cities | | | | |
|Fiscal incentives available to cities | | | | |
|The impact of national governments policies | | | | |
|Please add any factors you think are | | | | |
|Important which are not already mentioned | | | | |
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Appendix 4.
South African Cities Network.
Johannesburg Site Visits. April 2003
Key questions/issues
1. Strategy
What was the challenge to which the initiative responded?
What was the role of strategy?
How was the initiative consistent with strategy?
Who led the initiative?
2. Implementation
How was implementation planned?
What were the factors that supported implementation?
What were the factors that inhibited implementation?
What role did city government/agency play? Why?
What roles did others play? Why?
What decisions were important?
3. Deliverability
Who delivered the initiative?
What tools were used?
Where did the resources come from?
How as delivery controlled?
4. Outcomes
What are the outputs?
What might be the outcomes? short term? long term?
How might it contribute to : a) competitiveness ? b) poverty alleviation ?
5. Assessment
What does the initiative offer in terms of lessons for other cities, and other initiatives in Joburg?
How is it being evaluated?
How could it be disseminated?
Appendix 5.
South African Cities Network.
Roles of key players in City Economic Development Activities.
| |Sector Strats |SMEs |Regeneration |Trade & |Intermediate |Skills enhancement |Strategy |Evaluation & |
| |& Initiatives | | |Tourism |Employment | |Making |Review |
|Elected Leaders | | | | | | | | |
|City Officials | | | | | | | | |
|Development | | | | | | | | |
|Agency | | | | | | | | |
|Trade Unions | | | | | | | | |
|Business and | | | | | | | | |
|Business Leaders | | | | | | | | |
|Community | | | | | | | | |
|Organisations | | | | | | | | |
|Universities & | | | | | | | | |
|Research | | | | | | | | |
|Institutions | | | | | | | | |
|National | | | | | | | | |
|Government | | | | | | | | |
|Provincial | | | | | | | | |
|Government | | | | | | | | |
|International | | | | | | | | |
|Organisations | | | | | | | | |
Appendix 6.
South African Cities Network.
Scenario 1 ‘Metro-magic’
The year is 2008. Over the past 5 years the South African economy has grown by an average of 4% per year based on a combination of rapid new foreign investment into the country and the strong growth of local enterprises in high value sectors (Finance, Tourism, ICT, medicine, culture, media, film, and advanced manufacturing). Unemployment rates have been dropping by 2% year. Crime has declined, and several international media groups have recognised the South African cities as the most improved in the world.
The ‘South African Cities Alliance’, a new grouping of Cities, Provincial Governments, and Departments of the National Government has been formed following efforts by the South African Cities Network supported by SALGA. This Alliance have developed a new programme to combine resources and provide a single fund for investing in the long-term prosperity of South African cities, called ‘Rainbow IQ’. All cities have access to the fund and it replaces 28 other previously disjointed funding streams.
There are strong or emerging city governments in all the 9 main cities of South African. There are stable democracies across the Southern Africa region more generally, and international immigration into South Africa is accelerating due to the economic opportunities available here. Mortality rates have improved substantially with new medicines widely available.
South African has won the right to stage the soccer world cup in 2010 and preparations are now in full flow.
How would your approach to city economic development change in this scenario?
What changes to your arrangements and tools would you seek to make?
Who would you work with?
How would South African Cities need to work together?
South African Cities Network.
Scenario 2 ‘More of the same’
The year is 2008. Over the past 5 years the South African economy has grown by an average of 2% per year based on a combination of modest new foreign investment into the country and the modest growth of local enterprises in high value sectors (Finance, Tourism, ICT, medicine, culture, media, film, and advanced manufacturing). Unemployment rates have been dropping by 0.5% year. Crime has declined, several international media groups have recognised the South African cities as the much improved. Sector groupings have been formed by business leaders within most South African cities and they are starting to seek resources from all parts of the public sector to support their activities.
Provincial Governments have becoming increasingly involved in supporting urban economic development, but have tendency to do their own thing and not work within the new city plans and strategies. Departments of the National Government have been continuing with a disparate range of efforts. International donors and lenders have tried to lend directly to South African cities with little success yet.
There are improved city governments in all the 9 main cities of South African. There are stable or emerging democracies across the Southern Africa region more generally, and international immigration into South African is accelerating. Mortality rates have stabilised and improvements in health care are widespread.
South African has won the right to stage the soccer world cup in 2010 and preparations are now in full flow.
How would your approach to city economic development change in this scenario?
What changes to your arrangements and tools would you seek to make?
Who would you work with?
How would South African Cities need to work together?
South African Cities Network.
Scenario 3 ‘Hard Times’
The year is 2008. Over the past 5 years the South African economy has grown by an average of 0% per year based on a combination of very slow new foreign investment into the country and almost no growth of local enterprises in high value sectors (Finance, Tourism, ICT, medicine, culture, media, film, and advanced manufacturing). Unemployment rates have remained stubbornly high. Crime rates as the same, and several international media groups have stated that South African cities are much improved, but are still ‘not safe’.
Resources for city economic development are very tight. National departments of government continue to develop sporadic programmes, but there is no real initiative save for a large scale incentives programme developed by Treasury to encourage foreign firms to invest. This provides them with substantial tax relief for the first five years of an investment.
Some major infrastructure projects have been delayed. Provincial Governments have re-trenched and are not seen to working too much with cities, although they are very keen on marketing activities.
There are effective city governments in all the 9 main cities of South African. There are a mixture of stable and less stable democracies across the Southern Africa region more generally, and international immigration into South African is accelerating due to the political stability here.
South African has won the right to stage the soccer world cup in 2010 and preparations are now in full flow.
How would your approach to city economic development change in this scenario?
What changes to your arrangements and tools would you seek to make?
Who would you work with?
How would South African Cities need to work together?
Annex 1.
SACN Economic Development Training.
International Case Studies.
London.
Introduction.
London provides an interesting case study because it is successful city which has had economic development and revitalisation success despite many years of uncoordinated and unplanned activities. Until recently, it has not had a city government, and the new London Development Agency was only established in 2000, as part of the Greater London Authority. A case study on it’s work to date is presented below. In addition, the lack of any city government from 1986 to 2000 provided some organisations in London with the scope to experiment in economic development activities. One of these, Greater London Enterprise, is a very interesting example of a publicly owned economic development company that delivers a wide range of services to SMEs on an unsubsidised basis, providing something of a model for sustainable economic development activity. A case study on GLE is also presented below.
This case studies highlights:
▪ Issues of multiple actors on the economic development scene.
▪ Defining a clear role for a city development agency.
▪ Role of national government in a centralised nation state.
▪ The ‘global city’ growth model.
▪ Co-ordinating role of an Economic Development Strategy.
▪ Commercial approaches employed economic development companies.
▪ Services to SMEs as key area for commercial economic development services.
▪ Commercial business model for an economic development company.
Context: Economic Development in London.
London is successful city economy. London is Europe’s largest city and is growing rapidly at this time. Recent analysis suggests that London will gain 900,000 people and about 600,000 jobs between 2002 and 2014. This growth in jobs is driven by London’s position as Europe’s premier ‘global city’ providing the largest Finance and Business Services hub within the EU, operating as the counterpoint to New York and Tokyo within the European Time zone. Population growth in London is not causally linked to job growth, London is growing because of net international in-migration and through natural growth of its population, and especially it’s minority ethnic communities.
Population growth is occurring after a long period of first decline and then plateau. Linked to demographic change and the structure of households, this population growth is giving rise to an acute shortage of housing and a new residential property boom. A major economic development problem concerns how to accommodate this growth through new housing and, at the same time, to create and maintain high quality urban design, and continue to provide new locations for firms and jobs.
London’s economic upswing is led by the leading sectors, especially finance and business and professional services. However, London’s pre-eminence in Europe is by no means guaranteed over the long term. Individual European cities such as Paris, Frankfurt and Amsterdam (Finance and Business Services), Paris, Brussels and Berlin (Diplomacy and Business Services), Paris, Milan, and Barcelona (Creative Industries) are in aggressive competition with London for market share. Macro-economic policies such as entry to the Euro, or the harmonisation of certain European taxes, can affect London’s competitive position.
London’s GDP growth, allied to the rest of the South East of England, leads the UK Economy but there are still persistent difficulties in capturing the benefits of this growth for a wide range of citizens and communities. Unemployment rates, while improved, remain well above the national average. Concentrations of poverty and disinvestment remain stark in an arc of deprivation around the north, south and east of the central business area (containing 13 of the 20 poorest municipalities in the country).
London has become a truly multi-racial and multi-ethnic city over the past 20 years. In modern times, London is Europe’s first ‘global village’; with a 26 percent non-white population, over 30 communities with more than 10,000 minority members, over 250 first languages spoken by children in its primary schools, and more than half of all black and minority populations of the UK living within its boundary. However, despite the economic upswing, and the success of many entrepreneurs from the black and minority communities, unemployment rates remain very high (more than twice the average for white populations) and income rates for the employed remain comparatively low.
Change in the local economies of London.
The upswing has affected London’s economic geography in important ways too. ‘Central London’ is now a much larger area than previously, with CBD functions now spread out to include large parts of the old inner suburbs and industrial and dock areas, in Camden, Islington, Hackney, Tower Hamlets, Southwark, and Lambeth, in particular. The displacement of more local and traditional economic activities from some of these areas, along with the gentrification of many surrounding neighbourhoods is a stark social issue.
The ‘West End’ and ‘The City’ have joined up again through major redevelopment in Farringdon, Holborn, and Clerkenwell. The central area has also finally embraced a long strip south of the River Thames from Westminster to Tower Bridges as the South Bank, Bankside, and the Butlers Wharf developments have come to maturity. The Docklands redevelopment continues apace with extensive further new building in the Thames Quay/Canary Warf area, and with major new developments in the Royal Docks to the East (An Exhibition Centre, Technology Park, University Campus, and an Urban Village are all either already open, or shortly to be so).
Heathrow Airport remains a strong driver of economic growth and regeneration. London’s new IT corridor stretches out west from inner west London, in a triangle with Heathrow as its centre of gravity. The new fast link train between Heathrow and Paddington Station (15 minutes non-stop) is encouraging an acceleration of the Paddington basin regeneration into a new commercial and residential complex of stunning ambition.
London’s efforts to attract and retain globally mobile corporations have been highly successful in recent years when compared to other large European cities. London also has a high firm formation rate by UK and European standards. However, there is now emerging evidence of high volatility and mobility amongst the smaller growth companies that London incubates. Problems of worsening infrastructure, a bureaucratic maze, and expensive premises are encouraging many firms to leave London just as they enter their first significant growth phases.
London’s Economic Development Arrangements.
London has major investment and re-investment needs in sites, neighbourhoods, and localities just when the city economy is growing and producing strong revenues. Whilst London’s fiscal contribution is very strong, its fiscal system is very centralised, and locally/regionally it is extremely weak. Compared to other big cities in USA and Europe London’s economic development players have very few powers to raise revenue, borrow, invest, or save. They must instead work with largely bureaucratic grant regimes from central government and EU, and must seek to fit all publicly supported economic development activity into one of these rubrics.
London’s institutional architecture for economic development poses serious challenges to all who work within it and those who seek to use it. With literally hundreds of agencies, partnerships, alliances, and departments dedicated to the task of regenerating London’s economy, there is little scope for systematic and concentrated action on many specific issues, and a huge problem to evaluate the impact of any interventions taken. Each local government has its own programme and each central government department sponsors different development organisations (e.g. Learning and Skills Councils, Business Link, English Partnerships, Regeneration Partnerships, Regional Development Organisations/Agencies are all central government sponsored). The EU also provides support to a wide range of organisations, and the private sector has several organisational groupings.
London’s Economic Development Challenges.
London does not necessarily need to stem the growth in its population but it does need to be able to distribute new population growth in ways that promote more even, and sustainable, development; promote quality of life considerations; and encourage the right mixtures of land uses. The principal tool has to be the local land-use planning regime, backed up by a strong city-wide spatial development strategy. London’s new mayor is charged with developing such a strategy; good joint working relationships with the local (planning) authorities will aid its implementation.
Building the mechanisms for local benefit from the leading sectors is a complex and long-term task. Firstly, the business case for a more inclusive city has to be made and demonstrated in ways that will touch the major industry players. Second, both long term and shorter-term initiatives would need to be set in place that have industry (rather than political) leadership. For example a long-term programme of ‘second chance’ education and training should be established, with a focus on jobs in leading industry sectors (e.g. an adult college in banking and financial services). At the same time, initiatives in local supply and purchasing can be established and entrepreneurial skill can be loaned to local enterprises from major corporations.
All the lessons from recent evaluations show that unemployed people can find and secure work if they are helped to develop the right skills and to become more employable.[ii] However, many of the barriers to taking up work are not skills related. A more complex web of disincentives exists, including the difficulties of getting to key employment locations in London by public transport, and the marginal returns of moving from social security to paid employment (especially for parents and people with disabilities). Most of the resources available for helping the unemployed in London come from national budgets with national formulas attached. Few take account of the real additional costs of, and barriers to, working in the lower paid end of the London economy, and most fail to recognise the competition for jobs in London from the huge contingent labour force. A new suite of local and regional programmes is required.
The business case for a multi-racial city and multi-racial work forces is just beginning to be well made in London. As more positive stories emerge of the benefits of multi-lingual staff, and the importance of minority consumers and clients, so London business leadership is slowly recognising the great strength that London’s communities offer its economy. However, there is a long distance still to travel, and more vigorous local and regional development efforts will be required.
London’s spatial regeneration has recently been market-led and government shaped. Most of the exciting regeneration initiatives have occurred in areas surrounding the traditional CBD, and have effectively expanded its catchment area to the limits defined by the most deprived social/public housing estates. For the regeneration to go beyond these new social walls and into the poorer districts is the next priority. To achieve this, a carefully orchestrated programme of spatial planning combined with community economic development and business relocations is going to be required. There are available sites within the poorer neighbourhoods where business and community could readily co-exist (perhaps solving several problems at one time) but the process of achieving this will be a major management and inducement exercise for the Greater London Authority and London Development Agency.
London’s investment and re-investment deficits will best be tackled through a re-formulation of the national public fiscal and financial system to allow greater freedoms to the local and regional tiers. For example, US models such as Business Improvement Districts, tax-exempt bond issuing mechanisms, and tax incentives/abatements would be welcome in London. However some local and regional initiatives would make a difference immediately. Better co-ordination and oversight of all the public/private financing arrangements in London could result in improvements in the quality of propositions being presented for finance, a lowering of the transaction costs involved, and, as a consequence, an improved ‘take’ for London of the public/private finance available.
A major city-wide initiative to rationalise the economic development players is still needed. The prize would be a single economic development system that might be capable of concerted rather than disjointed action.
Background, Economic Development in London 1970 – 2000.
Historically, London has not been a great focus of local or regional economic development activity. Given the relative strength of the London economy throughout the last century, and the concentration of fiscal and financial power in the national government, most such policies have impacted London only in so far as they sought to de-camp jobs (often public sector jobs) from London to less dynamic economic regions in other parts of the UK. Thus a major plank of UK regional policy in the 1960s and 1970s saw the deliberate de-concentration of many civil service jobs from London to other cities such as Sheffield and Swansea.
However, whilst London has been a major financial, governmental, and tourism centre for most of the century, other sectors (e.g. manufacturing, freight, printing) have experienced marked decline and volatility throughout the period. Initially, Government policy was impervious to this decline because London had a ready source of job growth in the leading sectors, and policy only began to reflect concern when those leading sectors failed to ‘make-up the difference’.
The 1980s: Some of these declining sectors have been the subject of specific attention from local, regional, and national tiers of government. During the 1970s and 1980s a major focus of attention was London Docklands. The decline of London’s docks, with an estimated 300,000 job losses from a densely concentrated area over a 30-year period, presented a major re-development problem which was ultimately tackled by the now fabled UK Government-sponsored London Docklands Development Corporation (LDDC). This was not a focussed attempt to modernise London’s freight sector, but rather seen as an opportunity to completely redevelop the potentially valuable dock lands, given their proximity to the City of London. The development was heavily subsidised by long-term national tax incentives and facilitated by new publicly funded transport to the site, including the Limehouse Link (tunnel), The Docklands Light Railway, and more recently the Jubilee Line Extension.
Other industry-specific initiatives included efforts to support London’s manufacturing and furniture industries and periodic attempts to help London’s fashion sector. Several of these were pursued by both London’s local authorities and by the Greater London Council. Indeed, the GLC pursued an active economic development policy through the Greater London Enterprise Board (GLEB, 1981 to 1986). When the GLC was abolished in 1986, GLEB shifted tack and became a commercial organisation, Greater London Enterprise Ltd (GLE) that pursued some of these economic development objectives (e.g. small business premises and growth capital) on an unsubsidised basis, and without a strategic mandate (see below).
In addition to these sectoral initiatives, certain parts of London gained assistance from the national Urban Programme that was established after the inner city riots of the early 1980s. Places such as Brixton, Tottenham, and Peckham were included amongst these, all areas where a strong Afro-Caribbean community had been vocal in expressing their frustration at a lack of opportunity for them in the London economy.
A further dimension of the economic development scene in London in the 1980s included the national strategy to develop ‘an enterprise culture’, which included a strong emphasis on encouraging unemployed people to start up in business. Closely associated with this policy was the establishment of local ‘enterprise agencies’ which were formed as public/private partnerships, had not-for-profit status, and benefited from tax advantages for those companies that supported them. Some 30 Enterprise Agencies were established in London, largely with support from the London boroughs and the business community (notably banks, utilities and retailers).
Toward the end of the 1980s, London therefore had 33 local governments, each pursuing separate economic development strategies on a discretionary basis, and some benefiting from additional resources form the UK Government’s Urban Programme and Action for Cities. London also had some 30 Enterprise Agencies undertaking business start-up strategies, and the mighty London Docklands Development Corporation pursuing its re-development programme for the London docks.
Recession Years, 1989-93:London’s economic development policies have emerged significantly in the years 1990 to 2000. At the start of the decade, in the midst of recession, London’s average unemployment rate rose to equal that of the UK average as a whole for the first time in living memory. The aggregate unemployment score for Greater London masked huge variations across the city, and in several inner London Boroughs, unemployment was amongst the highest ‘district by district’ counts in the country. The symbolism of this was inescapable; rather than being the ‘unassailable’ national capital with high job and income levels, London was now amongst the poor ‘deprived’ districts in the country.
The explosion of initiatives that arose from this time to form the vast patchwork quilt of economic development initiatives that is seen today can best be summarised in calendar form:
In 1989 the Local Government and Housing Act put economic development activity by local governments on a formal regulatory footing. Nearly all 33 London Boroughs started to produce formal economic development strategies and plans. Through the 1989 Employment Act the Government announced the creation of Training and Enterprise Councils (TECs) modelled on the Private Industry Councils (PICs) of the USA but with additional powers to encourage enterprise and small firms. The nine TECs assigned to London set about building up local enterprise and training strategies. Also in 1989, the Government announced the reform of the ‘Urban Programme’ to create the ‘City Challenge’ initiative in which urban districts could ‘bid’ for central government funds to regenerate their localities. London won two pilots in the first phase (Deptford and Spitalfields) and a further seven in round 2 (a year later).
In the same year (1989) the European Commission made the first large scale attempt to address unemployment across the EC by expanding the scope of the European Social Fund (ESF) to support re-training and vocational guidance for unemployed workers. London did well in bidding for this fund and increased its share year-on-year for most of the decade. Again in 1989 the national Employment Service expanded its activities in London setting up ‘Jobclubs’, Restart Courses, and Employment Preparation programmes to help unemployed people find work, coupled with increasingly more stringent regulations on unemployment benefit and income support entitlements.
The 1990s Expansion: Starting in 1993, successful lobbying from London organisations, led by local government, prompted the UK government to designate ‘assisted area status’ to two parts of the capital, for the first time. This status brought with it industrial redevelopment grants for firms locating and expanding within the three ex-manufacturing zones (the East Thames Corridor, Upper Lee Valley, and Park Royal). This provoked an uproar in the traditional industrial heartland of the UK, that re-development monies were being given to London which was still seen to be ‘the wealthy capital’. In the same year (1993), as a consequence of the assisted area status and London-led changes to EU eligibility rules, London was successful in bidding to achieve EU assistance and was given Objective 2 (industrial re-development) status for one zone (Lee Valley/East London).
Following this, in 1994, as a result of a government bill to give greater freedom to operate as independent institutions, London’s 49 Further Education Colleges became independent corporations. Consequently many began to pursue the provision of services to businesses and entrepreneurs as a key aspect of their local strategies.
Also in 1994, at the invitation of the UK Government a group of London business leaders from blue chip corporations together formed London First, a business lobbying and promotional body for the capital. Existing business leadership organisations such as the London Chamber of Commerce and Industry (LCCI) and the Confederation of British Industry London Region (CBI, London) became more directly interested in London affairs. Partially spurred by this, London Boroughs joined together in a single co-ordinating and promotional body for local government in London, the Association of London Government (ALG). London First spawned the creation of the London First Centre, a government-funded and private sector-backed, inward investment promotional agency for London that developed a sophisticated marketing and liaison programme to bring inward locating businesses into London.
Later in 1994, and at the request of the UK Government, the London Pride Partnership (LPP) was established to bring forward a ‘development prospectus’ for London, the nearest thing London had to an Economic Development Strategy. The LPP was jointly chaired by the leaders of London First and Association of London Government. Other members included London Tourist Board, London Planning Advisory Committee, London Chamber of Commerce, and several more. That same year the UK Government created ‘Business Links’ (BLs) to be ‘one-stop shops’ for services and information to small businesses, under the aegis of the TECs.
In a major urban policy review, also in 1994, the UK Government announced wide-ranging changes to its support of urban regeneration in England and Wales. The creation of the Single Regeneration Budget (SRB) brought together 21 separate strands of central government funding for inner cities, to be distributed henceforth on a ‘challenge fund’ basis between competing neighbourhoods and public/private partnerships. London won over 50 bids in the first round, which had risen to over 250 by 2000, when the last bids were announced.
In a related development, the UK Government created regional offices of government as vehicles for co-ordinating central government activity at regional level. The Government office for London (GOL) was created with a direct line into a new minister for London at the national Department of Environment (DoE). GOL rapidly became a major player in promoting the London economy, managing the distribution of national aid programmes in the capital, and in developing new strategies for London.
In 1995 the emergence of new promotional bodies such as the London Higher Education Consortium, London Film Commission, London Manufacturing, London Medicine (and others) became major new sources of strategy development in London, adding a more sectoral focus to London’s thinking, (albeit with few resources to pursue policy goals).
From 1996 onwards, the emergence of ‘sub-regional partnerships’ reflecting segments of London (often North, South, East, West, and Central London) represented a new level of strategy development and partnership between public and private sectors. These sub-regional partnerships became a major interlocutor between city-wide and local tiers.
In May 1997 the (Blair) Labour Government was elected in the UK to end eighteen years of (Thatcher/Major) Conservative rule. The Labour manifesto included pledges to create a new Greater London Authority, with an elected mayor and 25-person Assembly, and a London Development Agency (LDA). GLA, upon its inauguration in July of 2000, had the specific remit to promote and co-ordinate economic development and regeneration in London and to promote spatial development, sustainability, culture, and tourism. Encouraged by the forthcoming changes, in 1998 over twenty London organisations created the London Development Partnership (LDP) to act as the forerunner to the LDA and set about preparing a new economic development strategy for London. In a parallel development the major London business membership organisations created the London Business Board (LBB) to co-ordinate their input to new London-wide bodies and strategies.
In 1999, following a major policy review, the UK government announced the abolition of TECs and Business Links in 2001, to be replaced by Learning and Skills Councils (LSCs) and the Small Business Service (SBS). London has five LSCs rather than seven TECs, and one SBS (called Business Link for London) rather than seven Business Links. In the latest round of assisted area designations London won a further tranche of EU investments and extended its Objective 2 area to cover the Lee Valley/East London, the Thames Gateway (nee East Thames Corridor), and Park Royal.
In March 2000 the LDP published its new Economic Development Strategy for London, in preparation for the arrival of the permanent London Development Agency.
London’s economic development arrangements had moved on significantly since 1990. From one point of view they are vast and fragmented with over 300 different kinds of organisations, strategies and vehicles, all spending public money sourced from five different departments of central government, several departments of the EU, from the 33 local authorities themselves and from private and charitable sources. Despite the improved co-ordination brought about by GOL, ALG, LBB, LDP and sub-regional and local partnerships there is still some difficulty in identifying what London’s overall economic development policy goals are, and the extent to which the right tools and resources are being applied to these goals.
A major theme of all the developments over this ten-year period has been that Central Government (rather than city or local government, or the private sector) is the major initiator of change, and the main sponsor of programmes. Central government has held all of the main levers of powers, and orchestrated the system through programmes of grant aid to support preferred strategies and approaches. There has been very little substantive economic development programming that is not central government grant-aided in some way. It is also evident that there are almost no examples of financing techniques, incentive structures, or other means of achieving economic development goals, which have been created for use in London.
London Development Agency.
The London Development Agency (LDA) was created in July 2000 as the economic development arm of the new Greater London Authority. It has a hybrid status as both one of nine nationally funded and regulated Regional Development Agencies, and as an Executive Agency of the new regional government, the Greater London Authority. Effectively, this means that the Mayor of London sets the LDA’s policies and goals, but the central Government provides the financial resources and sets the rules about how they can be used.
Although the LDA is new organisation it has inherited several functions and resources from previous arrangements that were nationally managed in London. For example it has inherited:
▪ A property portfolio of redevelopment sites which were owned previously by English Partnerships (London Region) whose staff it has also inherited.
▪ A major programme of medium term regeneration investment programmes previously supported by the national Government’s Single Regeneration Budget (SRB) whose programme management staff it has also acquired.
▪ A range of initiatives begun by the London Development Partnership in the years before the LDA was established including; Innovation, Skills, and other programmes.
The LDA is regulated by the Regional Development Agencies Act, which the UK Government introduced in 1998, and by amendments to it made in the Greater London Act of 1999. This legislation sets out in some detail the statutory purposes and guiding principles concerning how the LDA should operate, the main features of which are:
▪ The LDA must statutorily promote:
Business efficiency and growth.
Employment and Skills.
Investment in London.
Regeneration and Sustainable Development.
London’s role as a Gateway for the UK.
▪ The LDA must have Board of Director of 15 people, appointed by the Mayor of London, a majority of whom must be from a Business background, chaired by a business person.
▪ The LDA is funded by central Government transfers via the Greater London Authority and is subject to Local Government Financial controls and does not access to debt or other financing techniques.
▪ The LDA must prepare an annual corporate plan to set out it’s proposals in detail for the year ahead coupled with a 3 year financial strategy and indicative proposals.
▪ The LDA must produce an Economic Development Strategy for London (one of the 8 statutory strategies that the Mayor of London is required to prepare) and must keep it under review.
▪ The LDA has powers of ‘compulsory purchase’ of land to help achieve its objectives and also has the Planning Powers of the Mayor of London to support it and the investment regimes of its sister organisation, Transport for London, to help provide infrastructure investments that will support London’s economic development.
The LDA receives about £300,000,000 per annum through these processes in order to promote it’s activities. Many of these are already committed to existing programmes of investment that the LDA inherited from it’s predecessor bodies. As the inherited commitments ‘time expire’, the LDA will have increasing freedoms to allocate the freed up funds to wards the priorities it has agreed with the Mayor of London and its partners. The LDA has reviewed the inherited programmes and has thematically re-grouped them. The funds and the LDA’s assets are now grouped around three themes in the LDA’s Corporate Plan:
Area Interventions.
These involve a range of initiatives to invest in the regeneration of London through action within specific sites and locations that are ready for redevelopment in London. There are 9 major sites identified for multi-dimensional and integrated regeneration programmes and a further range of co-investments with the London Boroughs to promote local economic development as part of neighbourhood renewal in specific parts of London.
Sector Strategies.
These involve working directly with business to support and develop sectors in the London economy focussing upon productivity improvements and the encouragement of growth of early stage new activities. Established sectors that the LDA is working with include: Tourism and Hospitality, Creative Industries, Manufacturing, and the Public Sector. Emerging sectors include Life Sciences, ICT, Environmental and Green Industries, Social Enterprises. The LDA is not working directly with Finance and Business Services because they are already fully established and are well organised and supported by their own bodies (including the City of London Corporation, the Local Authority for the Square Mile).
Regional Priorities.
These involve attending to making investments in the strengthening of Economic Development in London as a whole. The themes are:
Capacity Building for community economic development, enterprise, and basic skills.
Intelligence and strategic developments for London.
Investment and promotion within London as whole.
The LDA has been operating for just over two years and has made steady progress in building its internal staffing and capacities and has managed its inherited programmes effectively. The LDA is now moving into a period of securing a greater portion of its budget on a flexible basis.
London Economic Development Strategy. 2001.
A major task of the LDA is to produce an Economic Development Strategy for London. This is potentially very important because:
▪ London has not had an Economic Development Strategy for nearly 20 years.
▪ There are so many economic development players in London that a common agenda is required to guide them.
The LDA developed a new strategy during 2000 and 2001 and this was published in July 2001. The LDA set out the strategy to act as a set of organising principles for economic development in London. At the heart of the strategy is a ‘Charter for London’. This is a statement of the 4 key goals that will be pursued and it is supported by 16 key organisations with an interest in London’s economic development, including the main business groups. The Charter Goals are to promote development in London through:
Economic Growth.
Knowledge and Learning.
Diversity, Inclusion, and Renewal.
Sustainable Development.
These 4 principles then form the basic structure for the London Economic Development Strategy and a detailed analysis and programme of work is offered to take forwards each one.
The LDA will be working with the partners to further elaborate through the common agenda for economic development through more detailed work to expand the Charter for London and to increase the size and range of the partners supporting it.
Detailed Case Study.
Greater London Enterprise Ltd.
Greater London Enterprise Ltd (GLE) is a good example of a publicly owned economic development that is run on a wholly commercial basis, delivering services to SMEs in London. It aims to tackle general weaknesses in the offering of capital and premises to all SMEs rather than highly targeted services to small firm that are in trouble. It is owned by the 33 London Boroughs, but it is not controlled by them or funded by them. It is unsubsidised business model that generates its won returns.
GLE provides accommodation in a range of forms and sizes to small companies in London. But, unlike many of the case studies we are considering here, GLE’s experience is built entirely upon its somewhat unique role as a publicly owned business that aims to provide commercial services to SME clients. GLE is not a ‘development or enterprise agency’ in the usual meanings of these words, because it is wholly commercially managed, and uses almost entirely private capital (derived from commercial revenues and from external investment and lending). Whilst the company is owned by Greater London’s 33 municipal local governments, their participation in the company is structured as that of ‘shareholders’, they do not control the policies of the company (including lending and investment decisions) and they do not seek to control how the company develops.
The challenge is to deliver good commercial returns and build shareholder value, whilst focussing the business solely on the commercial opportunities that arise in delivering services to growth oriented smaller firms in the Greater London region. This means that for the business to succeed it has to find ways to deliver services to SMEs that other more diversified companies (such as banks, property developers, and landowners) might not find attractive sources of their core business activity. Because GLE must focus on SMEs as the core customers, it has a primary incentive to find ways to develop commercially robust service offerings for SMEs that others (eg the banks, investment institutions, property owners) can then participate in with it.
The result is that GLE often finds ‘the commercial solution’ to the problems that smaller growth companies have, rather than the ‘subsidised solution’ (involving the direct use of public funds to try to ‘buy out’ the weaknesses in the market supply to such firms). This combination of commercial freedom combined with a clear focus on priority clients (the smaller firms) gives GLE the operational freedom and discipline to make a particular contribution to SMEs in London. Essentially GLE does the piloting, testing, and ‘standardising’ of services that can become commercially mainstream, once GLE has demonstrated how they can work.
It is argued that small businesses want commercially sustainable solutions to their growth challenges, and larger private sector players and all tiers of Government in the UK are starting to think the same way. GLE has been doing this kind of work for over 15 years, but is only is the past 5 years that Government has become a flexible and ‘business-like’ partner. GLE’s business is growing very fast and it has joint initiatives now involving major property developers, several clearing banks, and important investment institutions including pensions funds, investment banks, and the EIB. GLE is constructing investment opportunities in the SME market that offer each of these partners attractive returns.
GLE’s Business Model.
GLE operates across the whole of Greater London where there are over 275,000 (mainly small) businesses. The amount of public support within the GLE balance sheet is less than 2% of the whole, and these monies are carefully targeted at pump priming for new initiatives (such as the regional loan fund for disadvantaged entrepreneurs) that will eventually be wholly commercially sustainable. The core activities surround the management of real estate and growth capital to help SMEs grow and stay in London. GLE is a specialist business that only operates in niche markets (where SMEs need services and no mature market has yet evolved).
GLE is currently growing and have made a profit every year for the past decade which we have reinvested. Overall, the GLE Business Model could be summarised as follows:
• GLE uses a regional approach to achieve the necessary scale to operate diversified portfolios of SME premises and SME financial services so that it can spread the risks, the returns, and the benefits across a wide geographical area and a larger number of SMEs.
• It is a fundamental dimension of GLE’s business that the critical mass necessary to achieve this commercial sustainability comes from a regional platform. It is not easy to achieve both commercial returns and policy outcomes efficiently from highly localised initiatives that are either ‘policy rigid’, or costly, in terms of the ratios of overheads and subsidies to revenues generated.
To further explain the business model, GLE is the largest single specialist provider of SME financial services in London:
• It is a small firm Venture Capital company.
• It runs an active business angels network.
• It runs it’s own factoring company.
• It manages regional pools of loan funds for SMEs.
• It devises experimental funding mechanisms for disadvantaged and creative businesses.
GLE is also a major provider of SME accommodation in London:
• It owns and manages the GLE Business Villages.
• It redevelops industrial estates for use by new generation smaller firms.
• It develops and sells ‘live/work’ space for creative entrepreneurs.
• It undertakes joint ventures with property owners to manage their sites for SME tenants.
• It manages regeneration investment funds to bring new capital into premises to provide accommodation for SMEs and to promote urban renewal.
GLE also provides a very wide range of softer services in research, policy development, consultancy, and SME support. These draw upon the core businesses in real estate and growth capital.
SMEs in the London Economy.
Looking at the position of SMEs within the London Economy, it is necessary to make some points that help to underscore the relevance of the GLE business model.
Firstly, London is the UK’s most prosperous region in terms of GDP per capita. It is a region with a very high level of business formation, it has excellent ICT and transport infrastructure, a globally renowned and vibrant investment community, and it attracts talented labour to its multitude of HQ functions (twice as many of Paris, four times more than Berlin). Globalisation has been beneficial to London. London’s strengths in Financial and Business Services, Media and Creative businesses, tourism, hospitality and ‘seat of power’ functions have all been augmented and re-energised by the growth in globally organised commerce in the past decade. London has once again become a major hub in the international economy; ‘a global city’.
However, the strong global ‘demand-side drivers’ that have led to ever escalating property booms in central London, and (until recently) long vacancy lists for skilled professionals in ICT and Finance, have also been met by serious supply side constraints in the city. London has had some difficulties in accommodating all the growth potential because of a lack of efficient investment and modernisation mechanisms in some part of the city, geographically, and notably in terms of transport, skills, housing, and business premises. These kinds of constraints create de-facto scarcities in important business and social inputs, even though there is no absolute shortage of the raw materials in London. There are; willing riderships for public transport, able people who want the skills to be able to work, and a vast range of sites and derelict buildings that could be redeveloped for residential and commercial purposes. But the mechanisms of economic inclusion for these untapped resources are limited.
In London, the primary result of this situation is spiralling costs, especially for real estate, and the consequent orientation of most redevelopment towards higher yielding uses such as ‘high spec’ housing, and ‘high end’ business accommodation. The implication is that the development and management of affordable accommodation for a diverse range of ‘entry level’ SMEs is not an attractive prospect for most commercial developers and landowners; there are higher returns available in other uses.
The Land-Use Planning system designates sites for ‘employment uses’ but landowners fight the planning system all too often, and are willing to let sites lie empty whilst they achieve changes in designation through a process of appeal, or a ‘war of attrition’. The result is that very few sites are being developed for SMEs, and medium quality affordable small business accommodation is hard to find.
A symmetrical, and related, problem exists for SME finance. Because London houses some of the most sophisticated financial institutions in the world, there are high premiums to pay for the skilled staff, legal services, professional advice, software, licenses, and other key ingredient that underpin commercial financial transactions in London. The result is that, somewhat ironically, it can be more difficult to transact smaller investments/loans for SMEs in London, because the average fixed cost of each transaction is higher than in some other parts of the country. Despite London’s huge supply of investment capital, very small deals are difficult to do, because each one is unique and requires diligent oversight, they are simply too costly and risky to the larger players, who have bigger business to do.
The impact of all these dynamics is that smaller firms can actually find London quite a hostile environment to find premises and finance, despite the fact that London is a very entrepreneurial city with high levels of business start-up. Lots of smaller firms decide to leave London as they grow, effectively exporting new jobs to neighbouring regions.
This sets the overall context for GLE’s work, and explains why it is necessary to deliver a commercial solution to London’s problems of SME accommodation and finance. A specialist commercial approach is successful because, unlike in many regions, these problems result from market distortions associated with the bottlenecks created by success and growth, rather than the dis-investment and dereliction that come with economic failure. Using public subsidies solely to address these problems may not work, GLE tries to prove that adequate commercial returns are possible in these transactions. The long term goal is to interest mainstream financial and property owners into providing services to SMEs by building initiatives that have reliable commercial business models within them.
GLE’s experience shows that Business Centres and similar initiatives, can be important actors in social and economic development, and urban renewal. However, the extent to which they represent a long-term solution to some of these public policy objectives depends absolutely on the commercial sustainability of the business model that delivers them. GLE believes that we will only really achieve development and urban renewal by shaping the strategies of the major market players to take this work forwards. Solutions which are dependent upon ongoing subsidies are seen as short term exercises that will not address the market positively.
Premises for SMEs in London.
The problems of SME accommodation in London are manifold. The transition of sites from traditional industrial uses to modern economic uses takes time and investment. One reason it takes so much time is that the public sector has limited abilities to process redevelopment applications. Fragmented ownership structures and fragmented planning policy also prevent rapid redevelopment. The pressure from landowners to utilise their land for higher yielding uses further retards the pace of redevelopment for SME uses.
Historically, London has had a lot of ‘business centre’ type initiatives; from incubation centres, to micro-business parks, to seed-bed centres, to so-called ‘innovation centres’. However, none of these have proved to be sustainable because the mix of services was often very costly and rigid, and the implicit business model required an ongoing subsidy. The tenant companies were not exposed to the market realities of locating in London and therefore were not able to be ambitious enough to grow at the optimum rate.
There have been some recent successes in developing wholly commercial incubators, with property developers and venture capitalists working together to try to ‘hot-house’ the growth of Internet Start-Ups and other new-Media/digital firms. This has been an exciting feature of recent commercial endeavour, and a lot has been learned about how to help ‘fast growth companies’ really grow fast. However, this model was also unsustainable because it relied on too narrow a sectoral focuses (only s and high techs) and was often liked to single sites. When the explosion blew over these new style ‘incubators’ had no strategy for continuation. Many have closed down. This is one reason why GLE believes that a narrow focus on fashionable sectors in the way forwards.
GLE’s Property Company.
GLE tries to expand the market for SME Accommodation in London against the backdrop of economic growth. This can best be done by a specialist business (one that is focused solely on this market and not likely to be distracted by the potential for higher yielding alternatives). This has enabled GLE to create one ‘expert’ management team, managing a wide range of SME accommodation sites, for businesses of all sectors, across a large region covering 33 municipalities.
This has been possible because, in 1986, GLE inherited a portion of publicly owned real estate that largely housed small business uses and was spread across London. This endowment was in some ways an accident of history. It arose out of the abolition of the Greater London Council. To put it simply, a new publicly owned vehicle was required to manage this portfolio of sites, but no public cash was available to pay the overheads, so a publicly owned, but not publicly funded, business was set up to it. Unlike most business centre initiatives GLE had to focus widely.
The key result was this enabled GLE to be a regional business right from the start, and it required that GLE engage in portfolio management rather than single site management. GLE had to get the portfolio to work as a whole, and this meant spreading risks and returns across the portfolio to build up the value of the balance sheet.
Given that real estate in London in high value, GLE has had little difficulty in using it’s balance sheet strength to effect commercial borrowing to bring forwards re-investment and expansion across our land-holdings. Consequently, because GLE has been willing to invest it’s own profits and debt finance to expand the range of SME sites it manages, other institutional investors have now become interested in providing capital to GLE to expand its operations and enable them to share in its commercial success. The GLE business model is very open to external investment capital because it is well ‘collateralised’ and it now has a 10 year track record of success to put forwards.
Therefore, GLE’s current size of about 20 sites/centres with about 1000 SME tenants from across a wide range of sectors and locations, is likely to expand greatly in the next period. By managing the whole portfolio rather than individual sites GLE is also able to bring a much wider range of financial and other services to its tenants, the services which it also provides at the regional level. However, it does not seek to oblige its tenants to use these services, it is more ‘menu driven’. If an SME tenant wants to use GLE’s other services, it is very pleased, but they are no more or less important a client of those additional services than any other growth company in London that might not be a tenant of GLE.
GLE is an SME Growth Business.
GLE had the option to go into the business of running ‘Business Centres’ along the traditional model. If it had pursued this it would probably have faced the political requirement to put one business centre in each of the municipalities of London and to run each in such a way that there was tight municipal control over the businesses that were allowed to locate in the them, and the services that would be provided. Of course, it would probably also have received some grant aid from each of the municipalities to help with the costs of running each business centre at a loss!!
When GLE decided not to go down this route, it did so because it wanted to become a properly diversified SME Growth Business, rather than a manager of subsidised real estate. It did this because it believed there was a business case for getting involved in providing premises, growth capital, and working capital, along side internationalisation and other support services, to SMEs on a commercial basis.
Only in this way would it be able to bring commercial capital into the process through its regional investment vehicles, including venture capital funds, property investment funds, and regional loan pools. It is the strength of the commercial performance of the properties that GLE manages, as SME accommodation centres, that gives it the balance sheet strength to get involved in the wider fund management and financial engineering activities. This property portfolio enables it to spread the risks and the returns better, and to mix its own commercial revenues with investment capital from banks, pensions funds, and investment institutions. Only as a regional (or national) business would it be able to use it ‘balance sheet’ in this way; optimising the scope for long term external co-investment.
It is a fundamental philosophy for GLE, that this commercial approach will leverage more benefit for SMEs than more ‘policy driven and publicly funded’ initiatives. In the context of London, this approach actually reduces the need for short term public subsidy on individual sites because GLE can manage them, and redevelop them, more efficiently.
GLE Adds Value to London
From the wider perspective of what is good for economic & social development and urban renewal in London, GLE can play an important niche role in bringing some key additional skills and inputs to the party. In the UK, all tiers of the public sector below national government are highly constrained in the extent to which they can engage in the engineering of finance for public benefit. Consequently, the public sector cannot easily invest in SME accommodation, especially in London where there are many higher yielding uses.
Sites that are owned by the public sector which might be good locations for SME Accommodation also have to be sold at the highest price in most cases, and there is very little scope for the public sector to ‘do deals’ with land to help secure more SME premises.
How the LDA is working with GLE.
The LDA wants to get involved in tackling the various ways in which SMEs face difficulties in getting access to suitable premises. In order to do this the LDA needs a joint venture partner who is able to bring private capital and management expertise into the process. There are some new national government initiatives that are designed to help (eg the Clusters Fund, the English Cities Fund), but without regional management capabilities these initiatives do not add up well.
GLE is able to contribute this range of expertise and partnership to the development and renewal processes in London. Knowing the importance of this dimension to local and regional development work in the USA, and elsewhere, this has led several other RDAs to ask whether this kind of expertise shouldn’t really be available to all regions?
In order to start to develop more effective approaches to Business Centres across regions, there is a need to move away from the view that single business centres can fundamentally drive local development processes. The provision of premises to SMEs is an expert business activity. Building effective regional and national/international businesses to deliver a market offering is the key ingredient to making localities and regions attractive for successful small companies.
Property Joint Venture.
The LDA and GLE have formed a joint venture to develop and manage more small business space in London, where the LDA contributes either land or cash and GLE undertakes the management.
Loan Funds.
The LDA has rationalised a series of small business loan funds in London and GLE is now managing them.
Consultancy.
GLE is supporting the LDA with consultancy on a range of issues.
Programme Management.
GLE as been appointed to manage a small grants programme for the LDA.
Private Investment Commission.
GLE is working with the LDA on a Private Investment Commission designed to bring Private Sector Financial Institutions into collaboration with the LDA and others around new funds and initiatives for economic development in London.
Glasgow
Introduction.
Glasgow is an interesting case stud. It offers a picture of a very effective city-wide development agency working closely with City Government, but outside of it’s control, and able to leverage resources from several partners.
Key issues:
Agency is city-wide with same boundaries as city government and is funded nationally, and from other sources.
Both City Government and Development Agency are active in Economic Development and have good partnership.
Image marketing of the city to reduce image of crime and grime has been successful.
Creative and cultural industries have helped change image of the city.
Importance of long term investment in partnership working.
Need to invest more in addressing enterprise and SMEs.
Need to avoid proliferating public sector schemes and programmes.
Background.
Glasgow entered the 1980’s with some serious social and economic problems, as well as the negative image associated with these. These problems included rapid population decline, employment decline largely die to huge shrinkage in the manufacturing base, obsolete infrastructure, poor housing, high crime, bad reputation, and bad environmental quality. Unemployment was high overall, including a substantial proportion of long-term unemployed. In addition, the growth of other sectors, such as services, to offset manufacturing decline was slow.
In 2002, Glasgow is now a major centre for retail and commercial activity. Retail activity in Glasgow has continued to expand, and is set to rapidly grow over the next few years with the construction of a new retail mall and environmental improvements to the city centre. Glasgow was recently confirmed as the UK’s most important retail centre outside London. In terms of commercial presence, Glasgow is the HQ location for most Scottish – based – utilities companies. The city is also the headquarters for several of the major Scottish Banks. In addition, Glasgow is capturing a large share of the outsourcing of finance and business services activities that is occurring. This has been a major source of new jobs for the city. As a result, the property market for commercial floor space is quite buoyant at present.
In employment terms, the public sector is a major employer, with the City Council and some national government functions being located in the city, including Scottish Enterprise, the Industry department Scotland, and the Department of Social Security. The higher education sector is very significant in terms of employment, revenue, and the financial contribution of student’s ti the city’s economy. In addition, the Universities are a major bonus in terms of the city’s attractiveness as a business location, and Glasgow’s’ position as an ‘Intelligent city’.
In terms of industrial employers, the shipbuilding industry continues to face decline. Despite major investment programmes to enhance competitiveness, the city’s remaining shipyards face further job cuts, and ever-increasing competition from East Asia. Despite the success of Scotland’s Central Belt in the microprocessor, microelectronics and computer industries, Glasgow has not benefited in terms of presence of manufacturers. Overall, Glasgow retains a small manufacturing presence that has dwindled historically due to relocation of firms to suburban sites, in particular to the surrounding Enterprise Zones and New Towns. Food and Drink manufacture is a significant employer, although the sector has been declining over recent years. However, some recovery is now evident, especially in the form of modernisation and investment by several national companies in the Glasgow facilities.
Glasgow has consolidated it’s presence as a major media centre, with seven dailies published in the city. Scotland’s main TV production and broadcasting centres are also located in the city, and a major expansion of the BBC presence is now underway as one positive impact of the creation of a devolved Scottish Parliament (which is based in nearby Edinburgh). Further, a number of production companies are involved in a diverse range of businesses outside Scotland. Another success for Glasgow has been in tourism. This has been further enhanced in the conference industry by the completion of the conference centre in Finniestan.
Glasgow has performed well in new business growth in the past 10 years. The city creates one-third more businesses than the overage Scottish rate, and in addition, survival rates are increasing. The numbers of companies in the software sector has shown a dramatic increase, with a 275 per cent rise in the late 1990s, supporting some 2500 jobs.
Glasgow’s present economic structure comprises of a large service base. In the 1990s, the service base comprised of 83 per cent of total employment in the city, with 20 per cent of total employment in Distribution, Hotels and Restaurants, 7 per cent in Transport and Communications, 21 per cent in Banking, Finance and Administration, 30 per cent in Public Administration and 5 per cent in Other Services. The manufacturing base has declined to comprise only 10 per cent of the city’s total employment. In terms of employment growth, Glasgow’s ranking vis a vis other major UK cities excluding London progressed from 7th position where growth was negative at -4.3 per cent between 1991-1993 to 4th position in 1993-95 where growth was 3 per cent. The main spur to recent growth has been the service sector. The persistence of high special concentrations of unemployment, poverty and disadvantage remain a problem.
The organisation of Economic Development.
The key institutions in the city include the City Council and Scottish Enterprise Glasgow (SEG) (formerly Glasgow Development Agency, a Local Enterprise Company within the nationally funded Scottish Enterprise Network). These organisations are a major source for addressing Glasgow’s problems and opportunities. There are also eight local development organisations, seven of which are based in areas of particular need for regeneration (‘regeneration areas’) and one that is a city-wide organisation. Scottish Homes is another institution created in the late 1980’s which has had a significant impact, as is Scottish Enterprise, created in 1990.
The City Government delivers many functions in the city, being the planning authority, and having responsibility for education, housing, transport and social work. It also has a sizeable input in economic development and regeneration, with a regeneration unit of some one-hundred staff. Since 1996 legislation, the city council’s expenditure on economic development activities has had a statutory basis. Development activities include city marketing, physical improvement, planning approval, employment initiatives and small business provision. It is a major player in terms of activities, as well as funding other bodies that are involved in regeneration and development.
Scottish Homes is an executive public agency that came about from the merging of public housing stock.
Scottish Enterprise is also an executive agency that came about from the merging of the Scottish Development Agency and Training Agency in 1990. It is an economic development agency for lowland Scotland, and contracts thirteen Local Enterprise Companies to deliver its strategic objectives. Scottish Enterprise Glasgow is the largest Local Enterprise Company within the Scottish Enterprise Network.
As the Glasgow Development Agency, SEG itself absorbed Glasgow Action (a private sector led City Action Team) upon its establishment. The company is responsible for a wide range of economic development and training activities, and can be said to be truly multifunctional. These functions broadly fit into the categories of business development, environmental and property development, and human resources development. SEG actively participates in much joint working with the city council. The boundaries of the council and SEG are coterminous.
Joint action between SEG and the City Government includes the funding of local development companies and projects such as the Business Location Service – an inward investment unit for Glasgow situated within SEG, and Glasgow Works – an intermediate labour market scheme to help unemployed people gain access to long term work through supported/transitional employment. In addition SEG, with the City Council, are main players in Glasgow Alliance (formerly Glasgow Regeneration Alliance) which is a strategic umbrella body for the economic development and regeneration of Glasgow. SEG itself employs some 130 staff, and had an expenditure of 70 million pounds in 2000. Much of the actual delivery is contracted to other institutions such as FE colleges in the case of training, or local development companies in training and business support.
As with most of the case studies, there is a wide variety of projects, services and strategies at work within the city. Glasgow Regeneration Alliance (Now Glasgow Alliance) was a mechanism for establishing strategic objectives in the past, mainly concerned with the eight priority areas in Glasgow. This institution was granted funds by the Scottish Office to hire executive personnel in 1997, and its brief has now been extended to establish a strategic framework for a wide range of economic development and regeneration issues for the whole city. Development strategies and activities appear to be reaching some maturity of effectiveness in the city. Certain key target sectors such as call centres and software have performed well. As mentioned earlier, start-up companies have been a success in terms of numbers and performance. A major property development project, Pacific Quay, received enough public funding to go ahead, and was completed for the millennium.
Glasgow has been pioneering in its approach to the problems of long term unemployment, social exclusion and housing. Both the WISE Group and Glasgow Works scheme have successfully used their intermediate labour market model to gain employment or further education places for two thirds of participants who were formerly long term unemployed. However, there remain marked polarities in the city. Concentrations of unemployment and low income still persist. There is also a case that the drive toward services and knowledge-based industries provides employment opportunities that many residents at the margins find hard to compete for. There remains a difficult job of imparting the importance of education and training on these areas, and providing the necessary infrastructure to raise standards of attainment
In terms of stabilising the city’s manufacturing base, there has been the development and assembly of sites from industrial users within the city. These include a number of industrial parks, and a major science park. Associated with this has been a programme to reclaim industrial and derelict sites in the city, which comprise 10 per cent of the land area. Overall, there are many areas of activity in Glasgow in which the development organisations have been involved; there are many areas of activity in Glasgow in which the development organisations have been involved. There have also been many instances of innovation in certain approaches. However, despite the huge amount of energy and commitment, there remains one major weakness in the institutional approach. This is that the efforts are overwhelmingly public-sector, or quasi public-sector in nature.
The input and involvement of the private sector has never been truly significant in the regeneration and development of the city. Nevertheless, Glasgow has faces serious problems of both economic restructuring and social deprivation since the 1970s. There is some feeling now in the city that there are real opportunities for development and improvement as opposed to past sentiments of consistently fighting a losing battle against the city’s problems and negative external impressions.
Strengths and weaknesses.
Glasgow has some interesting strengths and weaknesses. One overwhelming strength is the institutional system that operates in Glasgow. Having one single development agency (SEG) and one local authority (Glasgow City Council) with coterminous boundaries is a major strength. This arrangement substantially removes many barriers to co-ordination that have held back other cities. It has also enabled the effective development of shared strategy and a clarity of focus on implementation roles and remits. The presence of local development companies in the regeneration areas also provides for closer community and business interaction.
The re-positioning of Glasgow during the 1980s and 1990s from a site of industrial dereliction to a modern and vibrant city has been an effective achievement. This has required both the physical and economic restructuring of the city combined with ambitious and effective marketing and promotion of Glasgow’s new identity as both a safe and clean city, and a city of culture and creativity. In this regard Glasgow’s’ locus as centre for Film, TV, and Media, and it hosting of major cultural events, such as the Glasgow Jazz Festival, have been very important dimensions of its achievement.
However, there are also weaknesses within the institutional and strategic approaches taken in the past. Despite advantageous institutional arrangements, there is much opinion in the city the co-ordination could be better. There is also the beginning of a proliferation of institutions dealing with aspects of development. The City Council has, in recent years, been developing new centres, units or companies to manage new development functions. The local development companies in Glasgow are variable in terms their quality and impacts. Several have folded or have had serious operating problems, and have been rescued and resurrected by the council and SEG. Significant sums of money have gone into maintaining these companies. However, these LSD’s are a source of knowledge, experience and expertise in dealing with local grassroots issues and policy implementation.
Glasgow Alliance’s transformation is a curious development, especially since receiving Scottish Office Funding to establish executive staffing. Despite a joint Economic Development strategy formulation process by SEG and GCC in 1998, the Glasgow Alliance has gone ahead with the additional creation of a regeneration strategy.
The focus on environmental and property development and regeneration may at times, have gone too far. Whilst the need for and attractive core city is essential, the most pressing problems for Glasgow would appear to be social-and business-related. Deprivation and a less than vibrant business base remain evident in Glasgow. In fact, there could be more of a business development focus that could perhaps, also tie in with providing employment opportunities in or near regeneration areas.
Another source of weakness is one that has been externally imposed. Both the Scottish Office and Scottish Enterprise (and now the Scottish Executive) have given out contradictory messages to Glasgow in the past. Glasgow has too often, it seems, been seen as an intractable problem, rather than the opportunity by the government and its executive agencies. This has left a vacuum, and has meant that the city’s institutions have been subject to policy drift. The absence of effective civic leadership has not helped this situation. Private sector leadership in the city is also very weak. The business voice is not feeding into strategic and operational decisions about the city.
The strong public-sector presence in development and regeneration needs complemented by effective strong business involvement. This would increase the sustainability of development activity, and would also contribute significantly to enhancing Glasgow’s position as a location for business.
Overall, there are both strengths and weaknesses attached to Glasgow’s institutional structure. The expertise and knowledge in regeneration and development sphere is a significant asset. However, it is paradoxical that this expertise is overwhelmingly public-sector in nature. If market awareness and business understanding were to be enhanced even further amongst Glasgow’s institutions, there could be scope to really enhance the city’s competitive position. In addition, there is an increasing and bewildering range of schemes for development and regeneration. This may present further barriers to co-ordination in the future.
Berlin.
Introduction.
Berlin’s economic, institutional and social structure have been greatly shaped by the political events of the Twentieth Century, including both World Wars and the Cold War. It is probably the best example of a European City where economic development has been most influenced by politics. Berlin is situated well into the east of the Unified Germany, and has a population of 3 million (down from 3.6 million in 1993), and is declining despite major investment recently. The legacy of division from the cold war has greatly shaped the physical, social, economic and political profile of the city.
Key issues from this case study include:
• Redeveloping a city in the context of massive political change.
• The challenge of population loss from the centre city to the outer metropolitan area.
• Major physical regeneration alone does not guarantee job creation and economic development. Property management and development needs to be linked to economic development strategy.
• Need to restructure uncompetitive industries, and the time this takes.
• The need for a clear economic development strategy.
• The need for extensive labour market interventions to help workers adjust to the new opportunities created by re-development.
• Multiple development agencies needing to work together better.
West Berlin, it can be argued, although part of the market economy of West Germany, was nearly as much a product of government intervention, subsidisation and planning as the East of the city. In order to keep West Berlin viable in terms of the economy and social stability, huge subsidies and intervention was made by the government. East Berlin was the capital of the former socialist GDR – a centrally planned state. Modes of production and economic organisation were inefficient and out-dated by western standards. The physical and infrastructural capital of East Berlin was in a serious state of under-investment and disrepair.
After German unification, 75% of East Berlin industries were scrapped. The East Berlin economy collapsed quickly after unification. West Berlin’s legacy of division was as significant as for the East. Public intervention and industrial subsidies sheltered the economy from true market competition. Subsidisation attracted mainly labour-intensive, low value-added production jobs, with grants and tax breaks almost meeting the labour costs of operations. There was also a huge public sector workforce employed within the city. In addition, West Berlin lost the higher level functions that most large cities enjoy. So West Berlin’s economy was substantially distorted by this level of public intervention and it’s unique history.
Perhaps the most significant transition in Berlin is the relocation of the Federal Government, in terms of its two assemblies and civil service departments. This was seen as offering Berlin a great new opportunity for economic development and has certainly triggered the physical redevelopment of the city. However, there is clear sentiment that this is not, and will not be a wholesale solution to Berlin’s economic problems.
Background.
Berlin’s economy was in stagnation for most of the 1990s. In terms of economic growth, it has been the worst performer amongst all the other German states since 1993. Average GDP growth has been very low (between 0% and 1.0%) for most of the last ten years and unemployment has been high at 15% -20 %. De-industrialisation has had a substantial impact on both employment and the economy. The overall decline in manufacturing employment was 32% between 1989 and 1995. The service sector has shown substantial growth, however, but this has proved insufficient in the short to medium term to impact upon unemployment. In addition, the public sector in Berlin remains a major employer, but rationalisation is envisaged in the future which will incur job losses.
German Reunification in the early 90s had a significantly destabilising effect on the East German economy, including the effects of currency parity, which in effect over-valued the East German Mark by three to four times. This fuelled eastern consumer expenditure, inflated prices and production costs of eastern products making them less competitive, and increased eastern unit labour costs beyond average West German levels. In addition, the loss of traditional markets with former socialist countries accelerated the decline of industrial production. Nevertheless, Berlin retains significant industrial employers. These include Siemens, and a significant workforce in the food, chemicals, media, communication and office products industries.
Counter-urbanisation has rapidly occurred in Berlin post-reunification. The result has been the establishment of sites of residential, industrial and commercial development in a ring around Berlin – in the surrounding states of Brandenburg. In the 1990s, Brandenburg showed the highest rates of growth amongst all German states. The suburban location and relocation of activities away from Berlin has contributed to this. Labour market problems are more significant for West Berlin’s residents, who have a legacy of substantial employment in low-skill manufacturing. The people who were formally in industrial jobs often now compromise the unemployed. In 1993, unskilled workers represented 45%of total unemployed. In contrast, the East Berlin work-force was generally well educated and skilled, and was even regarded as an elite labour force within the GDR. Many of East Berlin’s workers are well skilled, trained or highly educated, and have proved to be quick in adapting to new opportunities in both East and West Berlin. East Berlin workers are also cheaper to employ than those from the West and are regarded as more flexible in the workplace.
Very high unemployment is the most critical symptom of economic and market restructuring in Berlin. There is a mismatch between the drive towards service and administrative sector expansion and the skills present in Berlin. The emergence of concentrations of unemployment is now a particular problem in the traditionally blue-collar residential areas of Berlin. Concentrations of disadvantage area now becoming more emphasised as a result. The worst unemployment rates are found in the traditionally blue-collar districts.
The institutional system for economic development
The most important aspect of Berlin’s institutional system is that it is a Federal State (Land) within Germany. This confers considerable power to the state assembly (Landrat) and executive (Senate), especially in terms of policy-making, expenditure, finance and law. Numerous mechanisms also exist at the Federal level for economic development, including the ministry of economics, and also several joint state funds which are basically a redistributive mechanism from the more affluent states to the poorer ones. Most states have similar executive agencies, which tend to be limited companies (Gesellschaft mit beschrankter or GmbH) concerned with economic development and promotion, and property development (Landesentwicklungs Gesellschaft or LEGs). Berlin also benefits from a Chamber of Commerce and Industry (Industrie und Handelskammer, or IHK) which in Germany enjoy similar legal status as a local authority and are the statutory representative of business, with compulsory membership and legally defined functions.
Berlin Senate is the executive administrative body for the Berlin Land. Functions are divided into a dozen ministries. Each ministry is headed by a Senator or Minister who is an elected politician and enjoys considerable power and independence in running these affairs. The relevant ministries for economic development include the Ministry for Construction and Housing, Ministry for Finance – property division. Ministry for planning, Environment and Transport, Ministry of Science and Research, and the Ministry for Economy and Enterprise. This ministry (‘Senatsverwaltung fur Wirtschaft und Betriebe’) is the main ministry concerned with economic development, running a total of seventy-six programmes including such categories as:
assistance in Business start-ups,
investment and financing assistance,
consultation advice,
promotion of research and development,
marketing consultancy,
labour market and employment assistance.
The funding for this comes from a number of sources, including the Senate itself, the EU, Federal Government and pooled state funds.
Berlin also has a number of executive and independent organisations and agencies involved in economic development. There are also a number of other organisations concerned with trade fairs and property management. Both IHK Berlin and BAO Berlin are independent and private-sector orientated. BAO itself is owned and funded by IHK Berlin and a number of investment banks. The other executive agencies (Berlin Partner, BLEG and WFB) are limited companies by guarantee, although the majority share of ownership and revenue funding rests with the senate.
The economic development approach taken involves many strands. The senate’s mission statement for economic development is illustrative:
The aim of the Senates economic policy is to create a modern, competitive economic structure as a basis for further development of the city as a European service industry with a strong industrial core
Berlin is heavily promoted as a business location nationally and internationally. Associated with this promotion is the redefinition of the city’s role as part of the relocation of the Federal Government to Berlin. The relocation was supposed as have several benefits to Berlin’s economy including raising it’s profile, increasing the presence of associated activities (media, lobbying, representative bodies), and the attraction of companies for a presence in the new capital. Berlin’s strategic position is also the foundation for promotion and development. Its position between east, west, north and south in Europe has been heavily emphasised. There are now over 100 institutions in Berlin that deal with east-west co-operation and trade.
Berlin’s main executive agencies involved in economic development
|organisation role |
|BAO Berlin |Consultant for import/export issues in trade foreign trade law, cooperative |
|Berliner Absatzorganisation and Marketing- Service GmbH (Berlin Export |ventures and public tendering. |
|Promotion Organisation and Marketing Service LTD.) |European market and EU advice. Advised on EU promotion measures for Eastern |
| |and Central Europe. |
|Ownership and membership: |Joint participation in trade fairs, delegation tours and presentations |
| |Hosts foreign delegations |
|Federal State of Berlin, Berlin IHK, Berlin Chamber of Skilled Trades, IKB |Promotes Berlin_Brandenburg economic region |
|Deutsche Industriebank, Landesbank Berlin | |
| | |
|Established: 1950 | |
|Berlin Partner |City marketing-public profile and business location |
|Partner fur Berlin-Gesellschaft fur Hauptstadt-Marketing mbH (Berlin Capital |Marketing and publicity events |
|City Marketing Company) | |
| | |
|Ownership and membership: | |
|Berlin Senate: private sector | |
| | |
|Established: 1995 | |
|BLEG |Site preparation |
|Berliner Landesentwicklungsgesellchaft mbH |Real estate development and marketing |
|(Berlin State Development Company Ltd.) |Administration of state-owned real estate |
| |Manages senate’s home-ownership programme |
|Ownership and Membership: | |
|Berlin Senate | |
| | |
|Established: 1993 | |
|WFB |Consultant for Berlin-based investment projects of domestic and foreign |
|Wirtscaftsforderung Berlin GmbH (Berlin Economic Development Corporation.) |businesses |
| |Advisory services for investors |
|Ownership and Membership: |Provision of information on Berlin-Brandenburg economic region. |
|Federal State of Berlin, Berlin IHK, Landesbank Berlin, Private sector |Consultation on promotion and financing options |
|concerns. |Support of investors in property acquisition |
| |Establishment of contacts to public agencies, associations, potential |
|Established: 1978 |business partners, etc. |
|IHK Berlin |Business Support and representation |
|Industrie und Handelskammer Berlin (Berlin Chambers of Commerce and Industry)|Vocational training and qualifications |
| |Business and market research |
|Ownership and Membership: | |
|Compulsory membership of all state enterprises- has similar legal status to | |
|local authorities. | |
| | |
|Established: 1950 | |
Property and infrastructural development has been a distinct and visible element of Berlin’s development approach, but has not been well integrated with Economic Development Strategy. Immediately after the wall came down, commercial investments in property and land development boomed. This was aided by a large number of generous public sector incentives. During the 1990s, approximately DM 31 billion (c 120 billion Rand) had been invested in property alone. The historical ‘Mitte’ district of the city represented a prime opportunity for development, as it had been left dormant during the division. Former sites where the wall was located have provided large strips of land development. Projects have included the well-known Postdamer Platz development. In addition to central developments, there has been much commercial and industrial property development in East Berlin.
Berlin also has a strategy to capitalise on it’s strengths as a research base, as it has over 250 science and research facilities and is developing five science and innovation parks. The stabilisation and development of the remaining industrial base has grown as a strategic priority. There are dedicated industrial sites in Berlin with subsidies and other forms of aid attached to them. In addition, there is a commitment to aid the modernisation and competitiveness of existing industry. There are also several other prominent strategies for Berlin, including expanding service sector activity, property and infrastructure provision, SME support, labour market support policies, and development and regeneration of the peripheral estates of eastern Berlin.
Berlin’s efforts at economic development appear to be much more confused than other German states. The major developments , and distractions, associated with becoming the Federal Capital have left the city in need of a major new economic development effort and a better joined up effort across the City/State Government.
Credits
Berlin Senate Various documents.
Berlin Chamber Various documents.
G Athey Background research.
New York City.
Introduction.
New York City is back. After 2 decades of decline and disinvestment in the 1970s and 1980s the city experienced a remarkable turnaround during the 1990s that saw it bounce back to the to be city for business in North America and one of the few ‘global cities’ at the top of urban hierarchy. With a population of 8.1 million in 2000, New York is a major finance and business services hub, but is also a centre for media, creative industries, and tourism and retains a core manufacturing and logistics/distribution role. Major reinvestment has occurred in the urban core of New York in the past decade and a wide range of development agencies have been involved.
In terms of the lessons New York City tells some salient tales that include:
▪ Importance of multiple development agencies working together.
▪ Distinctive but compatible roles for development agencies and Business Improvement Districts (BIDs).
▪ Importance of patience is realising major revitalisation dreams.
▪ A key role for development agencies in delivering fiscal incentives and financial engineering.
▪ Value of focussing on the core urban areas which already have a market (eg Times Square) as a complement to neighbourhood revitalisation.
▪ The supporting role of efforts to reduce crime, waste, etc and to improve the urban environment, including tackling the blight of sex and drugs in the central city.
▪ Partnership with the private sector at many levels.
▪ Strong leadership form the Mayor and the Governor.
▪ The need for a metropolitan economic development strategy to guide job creation.
▪ The need to develop mechanisms to promote access to jobs for city residents.
▪ The danger of over-reliance on incentives.
▪ Lack of focus on smaller firms and clusters.
▪ Over focus on small number of sectors, which might be vulnerable to shocks.
New York City’s governance system includes a strong city government with a directly elected mayor and a city council, and five boroughs (Manhattan, Bronx, Queens, Brooklyn, Staten Island) which have relatively few powers following changes. The City Government was consolidated in the early 1900s from the 5 boroughs to form a single unified metropolitan city. New York City is the major city within New York State which has a strong gubernatorial executive. As in all parts of the USA, the city is enfranchised through a charter from the state.
Economic Development Agencies.
Economic Development Agencies abound in New York. New York City has an Economic Development Corporation which is the main city based agency for economic development. This agency’s role and function and emerged and changed quite considerably since it was set up in the late 1980s. New York State also has an economic development agency, the Empire State Development Corporation (ESDC), that provides a wide range of economic development services and interventions. A key feature of this case study is the importance of collaboration mechanisms between these two entities. It will be shown that in the case of Time Square/42nd Street these two bodies have had to work together and formed a successful joint venture to redevelop the area. This is also true of the ongoing revitalisation of Harlem in north Manhattan, and more recently with the redevelopment efforts in Lower Manhattan following the events of September 11th 2001.
New York City Economic Development Corporation is incorporated by charter within the New York City Government. It is an executive agency with 504(c3) status, it is not for profit. It manages a separate legal entity, New York City Industrial Development Authority which is a financial intermediary that issues tax exempt bonds to raise capital for redevelopment and business growth, and provides tax based incentive programmes to support business retention deals. NYC EDC has nearly 200 staff and manages a budget of c $500 million each year and has extensive land holdings in redevelopment areas. It is governed by a Board of Director drawn largely for the private sector and appointed by the Mayor. The Mayor also appoints the CEO (President) who reports to the Deputy Mayor with economic development responsibilities. Within the City Government there is no strategic economic development function, although there was previously a strategy group within the EDC (see below). However within the City Government there are both a Department of Business Services (which runs business assistance programmes and supervises the Business Improvement Districts) and a Department of Employment Services which helps to direct welfare to work and other employment initiatives within the city. The EDC has also taken on the role of international marketing of the city since the mid 1990s, before which NYC was not active in soliciting investments from foreign owned companies.
In addition to the City and State owned Development Corporations, there are myriad other bodies including 40 Business Improvement Districts, more than 10 local development corporations, a major business leadership organisation (the New York City Partnership/Chamber) and a wide range of local development agencies including small business development corporations and community development corporations.
Current Economic Development Context.
Since September 11th 2001, New York City’s economy has struggled to regain momentum. The events tipped the city’s economy into a recession which was already heralded but arriving slowly.
The previous recent economic expansion of the 1990s had included several sectors and had permeated New York City ("the city" or "NYC") and the surrounding metropolitan region ("the region"), the city's economy was heavily dependent on the financial sector, which continued to be volatile and was particularly vulnerable to the ongoing tightening in monetary policy during the growth decade. Part of the growth spurt by new Internet companies that had increased hiring and heated up the Manhattan office real estate market was dependent on the ready availability of venture capital that was also jeopardised when financial markets cooled. Economic activity in many parts of the region have slowed as the city's financial sector retreats.
Through a series of lucrative 'retention' subsidy deals, New York City's Economic Development Corporation focus has been on its leading globally competitive sectors, particularly financial services and media. Little attention has been paid to the economic development needs of the industrial sector or, more generally, of small and medium-sized companies.
The benefits of recent prosperity have been highly concentrated at the high end of the income spectrum with the real living standards of middle and low-income families in the region still below levels reached at the peak of the previous business cycle in the late 1980s. New York City lost a wide swath of middle-income jobs in the 1990s, and much of the new job growth has been at the extremes of the wage spectrum. Although demographic factors noted below have played a role, the fact remains that the structure of employment opportunities in NYC is less favourable today than it was a decade ago to those with few skills and low levels of educational attainment. Real wages for the bottom half of the pay scales were lower in 1998 than in 1989.
Migration flows were considerable in the 1990s with increased foreign immigration, the out-migration of residents (including some who are foreign-born) moving to other parts of the U.S., and the renewed influx of young adults. There has been an increase in single-parent households and NYC continued to attract a higher proportion of young workers (ages 20-40) and a relatively smaller proportion of workers in their 40s, the prime earnings years, than nationally.
New York City's unemployment rate has declined, but it remains well above the national average and is substantially higher among Blacks and Hispanics, particularly in certain communities in the boroughs of Brooklyn and the Bronx. There are few city programmes that promote job access for inner city residents or that support and enable community economic development.
While labour force participation has increased to new highs, there has been a troubling rise in the number of working poor since the incomes many receive are too low to support families. Many families lack health insurance coverage, and lack of access to affordable and quality childcare make it difficult for many low-income workers to hold down full-time employment. In this connection, there has been a dramatic drop in welfare rolls associated with reforms in public assistance. Welfare reform policies, however, have emphasised employment at any wage, and have not focused on raising skill or education levels needed to improve long-term earnings and foster economic self-sufficiency.
Despite record budget surpluses for New York City and New York State in the 1990s, there has been little long-term planning to address public investment needs. This is particularly apparent in the proposed five-year capital plan for the Metropolitan Transit Authority, the NY regional mass transit system. The inability of the governors of New York and New Jersey to reach agreement on several regional transportation and port development issues facing the bi-state Port Authority of New York and New Jersey also hinders the region's capacity to address long-term planning and development needs.
Also, New York City has scaled back its capital support for the development of affordable housing, an area where rapidly rising prices pose a clear constraint on the city's ability to retain and attract a high-skilled workforce.
A faltering public school system impairs the city's ability to prepare its children for successful integration into the labour market and jeopardises the social cohesion of the city and the region.
What is the role of the Economic Development Agency?
National economic developments and policies heavily determine the condition and shape of the local economy, while local policies have considerable scope in affecting the utilisation of core resources such as labour, land and local tax revenues. Local policies have not been central to the competitive position of the city's leading global sectors. In order to help diversify its economy and expand and improve the employment opportunities available to its residents, New York City may develop policies to help small and medium-sized companies improve their competitive positions. New York City’s Economic Development Corporation has focussed its efforts largely on the redevelopment of key local areas (Time Square, Harlem, Lower Manhattan) and on the winning of retention deals with larger firms. It has used it’s bond issuing authority to create investment for redevelopment projects more frequently than for company expansions.
Greater opportunities exist for strategic workforce investments, from the use of welfare reform resources to the implementation of the federally-mandated Workforce Investment Act, these represent one of the best ways to raise the living standards of low and moderate-income New Yorkers by enhancing their skills and access to jobs, and by building career ladders that lead to the middle class. Several years of strong economic growth have created the opportunity to embark on a series of strategic mass transit improvements that will open up new economic opportunities. However, sound financing approaches are essential, and consideration should be given to ones that are linked to commuters or based on the concept of congestion pricing.
The city needs to better accommodate the growing need for commercial space in central business districts in Manhattan and other boroughs, and at the same time use its land use planning powers to maintain appropriate space for manufacturing. Better utilisation of well-located, scarce urban land would be facilitated through the redevelopment of brownfields, areas that have real or perceived environmental hazards but are not designated highly toxic "Superfund" sites.
It is also imperative that local officials develop effective means for regional co-ordination for infrastructure and transportation planning purposes, and, importantly, to minimise wasteful, zero-sum competition for business.
For most of the past ten years, the Economic Development Corporation in New York City has not had a strategic focus, has been reactive and piecemeal, and has not addressed the major challenges of diversification, inadequate earnings and opportunities for residents, and long-term infrastructure investment planning. The failure of the Federal government to regulate costly competition between state and local governments for the favours of private investment has compounded New York City's economic development picture, as has the failure of New York State's government to resolve disputes with New Jersey over Port Authority projects and the State's lack of commitment to adequate regional mass transit investment.
Economic development planning in the U.S. is typically decentralised, hampering the ability to rationally plan for metropolitan regional economic needs in general. The fact that New York City is the premier global business centre for the U.S. does not alter that. NYC has no choice but to develop the capacity to strategically plan for its long-term economic development needs and to organise a cadre of far-sighted business, labour and civic leaders to pursue more constructive regional economic co-operation.
Economic Development Contexts and Strategies.
To understand the strengths and weaknesses of New York City's economic development efforts, it is instructive to review in broad strokes the evolution of those efforts over the past quarter century.
1970s: From the time over 170 years ago when the Erie Canal first established regular transportation connections to the country's rapidly growing mid-section, New York City has been the commercial and financial capital of the U.S. New York City also emerged as a major industrial centre, with the number of manufacturing workers reaching 1 million in the 1950s. In the aftermath of World War II, national policies promoted suburbanisation and fostered the decentralisation of economic activity away from the Northeast and Midwest.
These trends, coupled with a prolonged retreat from the 1960s 'go-go period' on Wall Street, created havoc for New York City's economy in the 1970s. Dozens of corporate headquarters vacated the city for the suburbs or the Sunbelt and New York City lost 600,000 jobs. The dramatic erosion of its economic base and gross fiscal mismanagement culminated in the city's fiscal crisis of 1975-76, and the city lost its direct access to the financial markets and control over its budget for several years.
1980s: New York City's financial sector, particularly the securities industry, flourished during the 1980s expansion, and the growing internationalisation of the economy benefited the city's extensive producer services and media sectors. New York City attracted a considerable amount of foreign investment and there was a 25 percent expansion in the amount of commercial office space in Manhattan. Although the manufacturing sector continued the decline that had begun to escalate in the 1970s, the growth of several other sectors (especially health services and government) meant that the city was able to maintain a large middle class.
The early 1980s saw the emergence of a unique partnership between the City and the State governments and regional business interests in the commitment to begin a series of five-year capital plans for the Metropolitan Transit Authority. This partnership enabled the MTA to access the financing and provide the necessary planning horizon needed to halt the alarming deterioration in transit service, and begin to rebuild and modernise the transit system's rolling stock and its physical infrastructure.
During the 1980s, the city's economic development efforts concentrated on Manhattan real estate development but there was also some attention paid to the development needs of the other boroughs and some commitments were made to preserve manufacturing. The city and State Economic Development Corporations began the effort to redevelop the Broadway/Times Square area in the mid-1980s and the city offered developers land use incentives to put new office towers in the west midtown area north of Times Square.
Through the Board of Estimate (which was ruled illegal by the Supreme Court and abolished in 1989), the presidents of the five boroughs had considerable voice in City land use and economic development decisions in the 1980s. As a result, some commercial and major residential developments were steered outside of Manhattan in the 1980s. In Long Island City in the borough of Queens, Citicorp built an office tower, and the State and the City Economic Development Corporations began a major high-rise residential and commercial development called Queens West. The city EDC also committed resources to Metrotech, a major commercial project containing back office space for financial firms, located in downtown Brooklyn. Metrotech also marked one of the earliest instances of the city awarding a huge multi-million dollar economic subsidy package to a major financial firm, Chase Manhattan Bank, to entice it to retain and expand operations in New York City.
Although competitive pressures from around the nation, and increasingly from companies in other countries, were bearing down on New York City's manufacturing operations in the 1980s, intensifying pressures from commercial real estate played a major role in tipping the balance against NYC as a site for manufacturing. The city’s EDC was not totally deaf to industry's concerns. The EDC committed $80 million to renovate the Brooklyn Army Terminal for several hundred small and medium-sized manufacturing firms. And as part of its planning to revitalise the Times Square area, the city established protective zoning for garment and other manufacturing uses in the Garment Centre District between 34th and 42nd Streets. The city EDC also agreed to fund the Garment Industry Development Corporation as a labour-management-government partnership to aid New York City's garment manufacturing sector.
Under Mayor Edward Koch, the city embarked in the mid-1980s on an ambitious effort to expand the construction of low and moderate-income housing. Using revenues generated by the successful Battery Park City residential and commercial development on landfill in Lower Manhattan, the city's capital plan put $4.2 billion into housing over a 10-year period. Several community groups and the New York City Housing Partnership helped build the pressure that led to this innovative housing financing arrangement.
Recession years, 1989-93: The recession felt by the New York region (triggered by the 1987 stock market crash and the bursting of a real estate bubble that was hyper-inflated in New York City) began in 1989, well before the national recession, lasted longer (4 years vs. the national recession's 9-month duration) and was far deeper (the region lost nearly 10 percent of its private sector job base). The real estate market, particularly in the downtown financial district, experienced a severe slump that lasted until the mid-1990s.
Fearing another wave of corporate flight as the city had experienced during the 1970s, Mayor David Dinkins dramatically expanded the number of retention deals involving large financial service and media firms through the EDC. Somewhat late in the Mayor's 4-year term, there was an effort to develop a strategic economic development planning and programming capacity with the establishment of the Economic Policy and Marketing Group (EPMG), under the Deputy Mayor for Finance and Development. In order to move beyond the city's defensive retention approach, EPMG advanced the Strong Economy, Strong City plan in 1993. In this plan, EPMG utilised a sectoral industry focus spanning mature (garment) and high tech (software) industries, service (movie production) and resource-based (developing manufacturing industries utilising recycled waste material) to address competitive industry needs and barriers. There was also a belated attempt to develop a NYC workforce development plan incorporating local businesses, labour unions, training providers and academic institutions. This was the last considered attempt to build an economic development strategy for NYC.
In the agency re-organisation and consolidation that established EMPG, the city created the Economic Development Corporation (EDC) as its lead agency for managing city land and city-owned port facilities and markets, for economic development purposes. EDC was established as a quasi-governmental entity with limited City Council oversight. The EDC president, who is appointed by the Mayor, also operates the NYC Industrial Development Authority (IDA), which is authorised by the State to grant tax abatements and issue below-market rate industrial development bonds. Within the purview of the Deputy Mayor for Finance and Development, the EDC president negotiates the 'retention deals' and uses the IDA to formally grant the tax subsidies and provide low-cost financing. These are supported by a range of additional services to assist companies and prepare sites for commercial uses.
For a period starting in the early 1990s, the city government has attempted to systematically market New York City as a location for international businesses. In a collaborative undertaking with the New York City Partnership, the main business leadership organisation representing large corporations, CEOs and city officials met with and courted international business leaders, trying to interest them in setting up offices in New York City.
In addition, for a roughly 10-year period from the mid-1980s through the mid-1990s, there was a proliferation of private, non-profit and quasi-governmental entities engaged in economic development activities or in providing services to commercial districts. Local development corporations (LDCs) were set up around the city, usually to serve as advocates for the needs of industrial and commercial companies. Funding for LDCs often was provided through city and state grants. Community development corporations (CDCs), which had originated in Brooklyn in the mid-1960s, also increased in number during this period. (CDCs focus on community-based housing and commercial development, and in increasing the availability of financing for inner city neighbourhoods). CDCs have often used the national Community Reinvestment Act (CRA) to elicit investments from commercial banks. Under CRA, banks have been required to devote some portion of capital to neighbourhoods from which they draw deposits.
From the mid-1980s to the mid-1990s there was also a rapid expansion in the formation of Business Improvement Districts (BIDs) in NYC. First authorised by the state in the early 1980s, the city supervised the development of BIDs in several commercial areas throughout the five boroughs. BIDs were allowed to issue a special property tax assessment in relatively compact commercial districts with the funding most often used to provide enhanced sanitation and security services to area businesses.
In addition to the proliferation of local development corporations and the rapid expansion of the BID programme, Governance developments during this period included the adoption of a new City Charter in 1989 that centralised economic development decision-making within the control of the Mayor, rather than the boroughs.
Recovery and expansion, 1993-2000: Although the Wall Street sector (Financial Services) began to rebound in the early 1990s, the pace of job growth was slow during the early recovery phase and in the wake of the bond market-setback in 1994. It was not until 1996 that New York City's job growth accelerated, and other sectors in addition to finance, especially business and professional services and media, began to expand significantly. With the implementation of welfare reforms beginning in early 1995, New York City's unemployment rate rose again after having receded from a recession high in 1992, and did not drop below 8 percent until 1999.
Under a new mayoral administration (Mayor Rudolph Giuliani) in 1994, the city ended its strategic economic development planning function (abolishing the EPMG from the EDC) and capacity, and scrapped the sectoral and workforce development planning undertaken by the previous administration. In its place, through EDC, the City substituted a major focus on retention deals, despite the recovery and the global strengths of financial and media firms who were the main beneficiaries. New York City's economic fortunes in the 1990s did benefit considerably from the high priority the new administration assigned to crime reduction and quality of life improvements. Partly as a result of these improvements, the tourism sector prospered in the 1990s.
The renovation of the Times Square entertainment district, a joint venture project of the EDC and ESDC underway since the mid-1980s, made considerable strides in the 1990s with several major office and entertainment investments. In an effort to jump-start new interest in the Lower Manhattan financial district, the city and the state approved a package of tax incentives in 1995 through EDC and ESDC, designed to lower the costs of leasing space and to encourage the conversion of older commercial office buildings to residential uses. By the end of the 1990s the strength of demand for office space in both the downtown and midtown Manhattan markets and the increase in rents were so great that some companies turned to Jersey City across the Hudson River for more affordable locations. In fact, the demand for office space accelerated so strongly that some commercial-to-residential conversions in Lower Manhattan were reversed.
Building on an idea that originated in Britain, the U.S. launched a Federal Empowerment Zone programme in 1992. New York City received one of the 10 Federal zones when the Harlem-South Bronx Empowerment Zone was established in 1994. This area, which includes a predominantly low-income, Black and Hispanic population of about 200,000 persons, includes some under-utilised commercial and industrial land. Businesses locating in the Zone would receive employee tax credits and other benefits. The Zone programme would be able to draw on a total of $300 million over a 10-year period, with funding shared equally between the city, the State and the Federal governments, with EDC again working with ESDC to create a Harlem Redevelopment Corporation to lead the programme.
In the 1990s, private sector leadership was focussed on the NYC Investment Trust, operated by the NYC Partnership with $1 million investments provided by several dozen major corporations. Funds have been used to provide loans to small commercial companies for projects that benefit inner city business and economic development.
In an era not noted for innovative economic development planning, the Mayor promoted his willingness to invest considerable City resources in professional sports stadiums despite the perceived absence of any compelling economic development rationale. The City Council and the Mayor agreed in 1997 to establish a $30 million investment fund through the EDC geared to "emerging" high technology firms, although implementation planning was till underway as the downturn in s began in early 2000.
The city has not used its land use planning powers to retain or support light manufacturing operations in NYC. Rather, the Mayor attempted (unsuccessfully) in the middle 1990s to push through a far-reaching re-zoning of light manufacturing zones to facilitate the establishment of more "big box" retailers. After the Mayor's Office refused to aid commercial printers, many of who serve Manhattan-based financial houses and were being displaced by real estate pressures, the City Council stepped in to try to retain the printers in New York City by finding alternative space outside of Manhattan.
Despite record budget surpluses at the city and State levels in recent years, regional transportation or other infrastructure investment planning did not substantially benefit. Neither the city nor the State developed plans to utilise these surpluses to make strategic investments, or to improve long-range fiscal stability. The recently proposed five-year capital plan for the Metropolitan Transit Authority (MTA) includes some system expansion investments, but the $16 billion plan relies largely on debt financing with no other revenue sources identified to finance the debt service except for riders' fares. In 1999 the State eliminated a $400 million New York City commuter tax that could have been dedicated to mass transit purposes. Meanwhile, the Governors of New York and New Jersey have failed to reach agreement on several airport and water port facility investments that would be carried out by the Port Authority of New York and New Jersey.
Both the city and the State have passed a series of sizeable tax cuts since 1994, with many of them enacted in the name of 'improving the business climate'. Some of these cuts, which have included reductions in both the State and the city personal income tax, arguably should have reduced the tax burden relative to neighbouring states and weakened the case for corporation-specific retention deals.
For the most part, these tax resources were not used strategically to lower costs most critical to business, such as the local property tax. These cuts have created a significant budget gap two or three years down the road, and as the economy slows and the financial markets weaken, the city will be hard-pressed to maintain city basic services. Poor fiscal planning now will severely complicate the City's capacity to weather an economic downturn without resorting to service and investment reductions that could hamper local economic development efforts and compromise the quality of life.
A new Economic Development Strategy and new role for the EDC?
New York City is now seeking, in effect, a whole new strategic approach to economic development. For the past several years, the bulk of official attention and resources for the EDC have been devoted to retaining large financial service and media companies. This approach continued long past the point at which it became fairly clear that global economic forces had effectively demonstrated New York's position as a highly competitive location for such activities. At the same time, attention is beginning to focus on the need for new approaches to infrastructure and workforce development, and the need to deal more pro-actively with land use issues, the economic development needs of under-served communities, and of export industries that are dominated by small- and medium-sized businesses. This suggests a major change of focus for the EDC.
Also, with the prospect of continued national economic slowdown and the possibility of a continued slowdown in global financial markets on which New York's fiscal and economic circumstance is so heavily dependent, concern is emerging that local fiscal practices must protect the hard-fought gains the City has made in reducing crime and improving the quality of life. The City’s new leadership will now be expected to develop comprehensive visions of how to build on New York's many economic strengths, and constructively tackle the challenges of strategic investments, social inclusion, economic diversification, and fiscal stability.
A new economic development strategy for New York City and its EDC could address the following six areas:
▪ Infrastructure investment, particularly in transit and housing, to expand productive capacity: Despite record budget surpluses at the city and State levels, there has been little long-term planning to address public investment needs. This is apparent in the proposed five-year MTA capital plan, which comes up short in its planning to extend a new subway line to the boroughs outside of Manhattan and relies excessively on fare-backed borrowing. Despite a serious shortage of affordable housing, NYC has scaled back its capital support for housing development.
▪ Workforce investment: Through its federally mandated five-year Workforce Development Plan, the City needs to articulate a comprehensive skills development and job matching system that goes beyond the current "work-first" focus of its welfare reform effort, and that addresses the need for skill upgrading by incumbent workers as part of a closer linkage between workforce development and economic development. In addition to expanding the availability of health insurance and child care as part of facilitating the transition from welfare to work, and addressing similar needs of the working poor, New York City and State need to consider such measures as an increased state minimum wage, expanded earned income tax credits, and other measures to improve the rewards to work and address the disturbingly low living standards of the growing number of working poor.
▪ Land use: The city needs to be more pro-active in balancing the needs of rapidly growing Internet firms for Manhattan office space, with the needs of light manufacturing companies now located in Manhattan. The city also needs to plan how to expand its office capacity in the future, including improving the accessibility of locations in the boroughs outside of Manhattan, which have received little attention over the past several years. To free up the housing and commercial development potential of numerous parcels across NYC, the city and the State need to address the barriers to redeveloping "brownfields", sites that have real or perceived environmental problems.
▪ Re-direct economic development resources from 'retention deals' to supporting industry clusters and diversification. Drawing on the experience of several innovative programmes across the U.S., including that of the Garment Industry Development Corporation in New York City, the city and EDC should urge, and where necessary assist the formation of industry-based groups in several export-oriented industry cluster areas. As these industry self-help groups, (comprised of businesses, their suppliers, labour unions, and educational institutions), identify their competitive needs and barriers, local and state government should provide aid in a manner that benefits numerous firms, while at the same time enhances the desirability of New York City as a location for that industry, rather than awarding large tax abatements or cash subsidies to individual companies.
▪ Improve Public Education: The need to improve the public school system is probably the most important long-run challenge New York faces. From dilapidated physical structures, to low test scores, to the need to replace the tens of thousands of teachers who will be retiring over the next four years, public education needs substantial improvement in order to approach the level of the handful of the city's high schools (Stuyvesant, Bronx Science) that rank among the best in the U.S. It is also necessary to enhance the performance of the City University of New York system (CUNY) since it is the main path to greater economic opportunities for New York's large and growing minority and immigrant populations.
▪ Regional co-operation: One approach to curtail the problem the city faces in its 'retention' focus is to effect genuine co-operation among jurisdictions throughout the metropolitan region to rule out poaching businesses from one another. Leadership from the business community is essential in this area since businesses, much more than short-term oriented government officials, will gain from a better functioning regional economy. Equally as important, transportation planning has to be conducted in a meaningful fashion on a regional scale since the housing and labour markets clearly transcend multiple jurisdictions. The Governors of New York and New Jersey should be using the Port Authority as one of the main vehicles to approach regional problems, particularly transportation.
Continuing the redevelopment efforts in Lower Manhattan and in Harlem are undoubtedly a continuing priority. However the City and the EDC now have an opportunity to build a new approach to City Economic Development Strategy in the wake of the downturn in the economy and the impact of September 11th.
Detailed Case Study.
In focus; 42nd Street/Time Square.
The decision to reinstate 42nd Street’s international reputation as the world’s leading theatre and entertainment centre, marked one of the most ambitious and large-scale urban renewal programmes ever launched in the US. The proposal to drag 13 acres of mid-Manhattan urban environment out of the mire of sex and crime, to create a vibrant and safe family environment, was the ‘vision’ of Frederick Parrat, founder of the 42nd Street Development Project a joint venture between the City and State Development Corporations. Since announcing his vision in 1981, substantial support gathered from organisations such as the Municipal Arts Society and the public at large, and most significantly the from the City Mayor Giuliani (1993 – 2001) , in terms of both political and financial backing.
Due to the scale of this renewal programme and difficulties relating to fragmented tenure structures and deep rooted social problems, implementing the programme has been incremental, based on a site by site basis. Although not fully complete, this programme stands as testament to commitment of Mayor and the creation of an ‘arms-length’ agency to oversee the project (the 42nd Street Development Project Inc.), as well as the need to engage the private sector in the earlier stages of development and in sustaining the momentum of the programme through ongoing investment and management under the Business Improvement District (BID) model.
Context.
The State and the City’s revitalisation of the corridor between Broadway and Eighth Avenue aimed to transform this tough area, which has been slipping into disrepute since the 1930s depression with a proliferation of sex shops, sleaze and crime, into a dynamic and commercial corridor. The long-stalled Times Square development project has been on the drawing boards since 1967 and was originally approved in 1984. The redevelopment of the 42nd Street area forms the second phase of the renewal programme. The first phase, triggered by new zoning and rules enacted in 1982, put a dozen new office buildings and hotels on the drawing board in upper Times Square between 45th Street and 50t Street.
Redevelopment of the 42nd Street area however was not expected to occur from re-zoning alone, due to its deeply routed social and image problems, and an ambitious plan of condemnation and substantial tax incentives was proposed in the General Project Plan to facilitate the redevelopment of this area. The aim of this plan was to:
▪ Eliminate the blight and physical decay, as well as the crime and frightening street life, that characterised the West 42nd Street area;
▪ Preserve and restore the Project area’s extraordinary theatres and, by doing so, to revitalise the project area as a theatre and entertainment centre serving tourists and all New Yorkers;
▪ Develop the Project area’s commercial and retail potential to produce a lively healthy street ambience;
▪ Help upgrade public facilities in the Project area;
▪ Increase the Project area’s economic contribution to the City as a whole, both through increased revenues to the City and expanded private investment and employment opportunities; and
▪ Restore the Project area’s role as a positive influence on the adjacent communities[iii].
The centrepiece for this project was to be four office towers positioned at the eastern end of the Project area proposed by the Prudential Insurance Company and Park Tower Reality who joined to form the Times Square Centre Associates (TSCA). TSCA brought the right to develop these sites with a $241 Letter of Credit to the City’s EDC that would cover most of the condemnation costs and the renovation of the subway station and six theatres.
The impact of this proposal and all the ‘zoning induced construction’ would have been the creation of an office-tower canyon, comparative to the neighbouring Sixth Avenue. However, following the collapse of the market for office space in 1992, the City and State officials relieved the developers of their obligation to proceed with the towers. Instead, the City proposed a revised strategy to ensure immediate revitalisation of the project area based in renovation of existing buildings, within which the developers would be obliged to undertake a $20 million renovation programme, to enable new tenants to move into these sites in the interim, with the intention of developing the office towers in the future when the market conditions might be more accommodating.
This new plan, entitled “42nd Street Now!”, signalled the move away from large-scale office development, towards a more entertainment based redevelopment programme utilising existing buildings and building on the area’s historic reputation as a one of the world’s cultural centres. The intention of shifting the initial focus away from office development towards entertainment services, was to ensure rapid revitalisation of what was already New York’s most visited area, and could sustain subsequent office development when the market was again ready.
TSCA’s ‘Letter of Credit’ has been the primary source of finance in jump-starting this redevelopment process. This private investment has been spent on purchasing condemned buildings, with $18 million allocated to the 42nd Street Development Project Inc, the joint venture company of the two EDCs which were in charge of overseeing the completion of the project. The 42nd Street Development Project Inc. was itself expected to consume a large proportion of the acquisition and clean up costs of the entire programme and was to use unprecedented planning powers in acquiring sites along this strategic throughway and as acting as the central body in determining planning applications and subsequent marketing of the area.
Scale and type of development
Office vs. entertainment-based development.
The short-term move away from an office-based development to one centre around entertainment and recreation signalled a recognition that large-scale renewal programmes do not necessarily depend upon office development and that improvements to cultural facilities can be a valuable catalyst for future office based development. In particular, it recognises the value of the Arts in regenerating urban areas with the growing importance of the tourist sector and cultural industries in enhancing the city’s economy.
The decision to enhance the area’s entertainment and recreational services has also based on the recognition of the need to meet the entertainment needs of the 250,000 local office and service employees working in the Times Square.
The commitment of Mayor Giuliani to bring back the area’s “legacy of radiance and vitality” also gave substantial backing for an entertainment-led redevelopment programme through EDC. This political commitment was also accompanied by significant public financial backing to entice private investment. Substantial pressure has also been exerted by civic groups, who joined forces the Municipal Art Society, to develop a particularly active campaign opposing the sterility of the TSCA office tower plan, arguing for a renewal programme based on retention and enhancement of the area’s cultural heritage.
These pressures resulted in the City amending the zoning code away from office-based development to promote retail and entertainment development in an attempt to “ensure that the unique and valuable sense of place of Times Square will be retained”. This resulted in buildings that were to be demolished, now becoming refurbished as restaurants, stores and state of the art venues. Although TSCA resisted the change in direction initially, this soon weakened in light of the strong public support for this form of development.
Following an upturn in the real estate market in the mid-1990s, renewed interest arose regarding the development of the formerly approved office towers, this time from property developers, the Durst Organisation, who purchased one-quarter of TSCA’s remaining acreage for $75 million. This proposed the development of a 48 story office tower, with ground floor retail outlets, which will become home to media legends Conde Nast Publications (Vogue and Vanity Fair) and Skaddon Arps Slate Mergher & Flom, a New York law firm. This development will constitute Manhattan’s first true skyscraper in over 10 years.
Scale of development
The scale of development along 42nd Street itself was generally kept low. This was hoped to keep in-line with the existing character of the Street with a substantial proportion of the programme revolving around restoration of existing theatres, as opposed to large-scale demolition and reconstruction (for example, restoration of the New Amsterdam Theatre and the New Victory Theatre). At the Western end of the Project area, plans were announced in July of 1995 to build a 335,000 square foot retail and entertainment centre, put forward by American Multiplex Cinemas Entertainment, Inc. (AMC) and the Tussauds Group Ltd, with developers Forest City Ratner Companies. This development incorporates the restored facades of the Empire, Harris and Liberty theatres and the surrounding area of blight. This state-of-the-art 25 screen movie theatre includes curved, wall to wall screens, digital sound and over-sized seats, as well as five stories of exhibition space to house the Mme. Tussaud’s collection.
However, higher density structures have been proposed for three of the remaining parcels of land to be redeveloped. The site at the corner of 43rd Street and Eight Avenue, which stands as one of the last privately held sites in the Project area, has been proposed by the developer Tishman Urban Development Corporation with Disney, as a major entertainment/retail anchor for the eastern corner of the project area, comprising of a 47 story, 871,209 square foot, hotel and entertainment complex.
This development is proposed to consists of street level retail space with tenants such as Disney, IMAX, Sega and ESPN (totalling 137,145 gross square feet), above which will be time-share facilities of 119,047 gross square feet, a tourist and convention hotel with 615,017 gross square feet, including 680 rooms and 50,000 square feet of meeting space. On the exterior, there is proposed to be 10-12 super signs. This $303 million development is proposed to be the cornerstone of the 42nd Street Project, providing a new landmark for the city and symbol of rebirth for the area.
Design
A design guide was drawn up by Robert A.M. Stern and M and Co. in an attempt to create some synergy between the individual projects and to develop a coherent image for the area. These guidelines, outlined in “42nd Street Now!”, focuses on eclectic tourist/entertainment related retail uses, with large signage. This is exemplified by the multi-media icon to be positioned at the gateway location at the corner of Eight Avenue. The aim of this energetic and vibrant design is to animate the streets below, encouraging new forms of street entertainment and promoting the concept of the 24 hour city where visitors and nearby workers are happy to stay late into the night.
In terms of architecture, the design guidelines specify “strong contrasts of old and new facades, continuing the tradition of diversity and juxtaposition at street level”. This was promoted through construction of highly innovative designs, such as the two low-scale glass and framed buildings, designed by prominent architects Fox and Fowle. This is contrasted by sensitive renovation of New York’s oldest extant theatres, such as the Victory, including reconstruction of the exterior grand staircase and the “venetian” palazzo facade.
The intention to create a mixed form of land uses, with a particularly high entertainment component, is strongly reflected in the design guidelines. For example, the ‘Request for Proposals’ on the new hotel site specified a high degree of mixed use, favouring an entertainment/hotel complex. There is also a strong desire to marry the retail/entertainment uses with the subsequent office developments and office uses in the surrounding Times Square area. This aims to meet the needs of existing and additional office workers in the area. The specification of retail and entertainment uses on the ground floors of the office blocks and hotel complexes (for example the Durst skyscraper and the Tishman hotel), prevents these buildings from become viewed as hostile and impermeable by other street uses, continuing the lively street ambience at the ground level.
Market Factors
The decision to postpone the development of the four office towers following the collapse of the market for office developments in 1992, illustrates the volatile nature of this market and the need in certain cases for strong State and City intervention, if it is to foster market confidence.
The redevelopment of the 42nd Project area has been greatly aided by the Mayor’s strong commitment and vision over how this area should be developed, underpinned by substantial public support. The clear decision to develop the area as a major recreation and entertainment centre, provided potential developers with greater guidance of what forms of development are likely to be approved.
The financial support which has accompanied this political will, in the form of tax breaks and government aid, has also significantly reduced the level of market uncertainty and risk which formerly existed within this poorly perceived area. The role of the City in condemning and acquiring some of the initial clean-up cost has also proven a clear facilitator for subsequent private sector investment into the area.
Another major catalyst in triggering the redevelopment programme has been the strong commitment of major companies, such as Disney, early on in the development process which have acted as a strong magnet and reassurance to subsequent investors.
Process of implementation
Management and Structure
Partnership between the different tiers of public sector administration (State and the City) and the private sector has been fundamental to the success of the project. Starting from the level of the Mayor, there has been a strong commitment and vision for how this area should develop. This has been highlighted by John Tishman, the primary developer in the hotel/entertainment complex, who views this project as “proof that the public sectors can work together to accomplish great things, stimulate our economy and create jobs”.
The establishment of an arms-length body of the New York State and City Development Corporations (the 42nd Street Development Project Inc.) has been particularly effective in developing a streamline and coherent approach to the redevelopment of this area. This not-for-profit organisation has assumed the development control functions for the area, working in partnership with key architects and urban designers to develop the design guidelines and selection framework for proposed developments and acquiring enhanced CPO powers through condemnation of sites.
The 42nd Street Development Project Inc. has also been an important facilitator in the redevelopment process, consuming much of the initial acquisition and clean up costs. For example, it allocated $35 million of its budget to condemn the site of the proposed hotel/entertainment complex at the corner of Eighth Avenue. The 42nd Street Development Project Inc. has also been actively involved in the renovation of key sites, such the New Victory and the New Amsterdam, which it has been largely able to achieve through funding from TSCA as part of their “public amenity package”.
Condemnation and Acquisition
The power of the 42nd Street Development Project Inc. to condemn sites (delegated form the EDCs), has been vital to the implementation of the programme. The fragmented tenure structure of the area, with often illegal and underground occupiers, has made condemnation of whole sites a necessity.
Consequently, this form of urban renewal has been incremental consisting of a patchwork of smaller scale redevelopment, rather than large-scale comprehensive renewal programmes associated with some of the inner city regeneration programmes of the 1980s. This is a sequential form of redevelopment, starting with those sites at the inter-change with Seventh Avenue and Broadway, which were first condemned in 1990.
Engaging the Private Sector EDCs provide incentives.
Private finance has increasingly become acknowledged as instrumental in ensuring the effective implementation of the programme. The New York State and City EDCs have developed a range of mechanisms and incentives to encourage private sector involvement at the beginning of the implementation process.
To date, TSCA has been one of he main stakeholder in providing the finance to implement this programme, putting up much of the acquisition costs for the first 4 sites which form the inter-change between 42nd Street, Broadway and Seventh Avenue, with the intention that they may retain the right to develop them as office towers at a later date. By 1996, they had invested an estimated total of $300 million, whilst direct government investment stood at only $64 million.
Substantial levels of tax abatements and government aid have also been allocated to ensure the continued investment from these developers, such as the 25 year tax abatement for TSCA.
Externalities: transport infrastructure, maintenance and other infrastructural implications
The redevelopment of the area is likely to generate substantial amounts of vehicle and pedestrian traffic, adding to the already estimated 20 million visitors who come to Times Square annually, the 185,000 travellers a day who stream across mid-town Manhattan from the Port Authority Bus Terminus and the 500,000 daily transit users at Times Square sub-way station.
Following the removal of the obligation of TSCA to invest $91 million in the refurbishment of the Times Square sub-way, after the office tower development fell through, financing of this necessary project was put under jeopardy. However, the finance for refurbishing the sub-way was regained after TSCA selected to redevelop the site as a retail centre, housing Cinema Ride, the Disney Store and Ferrara’s restaurant in 1995. As part of this development, a new 24-hour subway entrance has been built within the new building on the site.
Planning gain
As mentioned above, Planning Gain (a system of extracting agreed parallel investment from developers in related projects and infrastructure when planning permission is granted) has been successful in securing new transport infrastructure provision for the area, namely refurbishment of the Times Square subway to date. In terms of financial gains to the City and the State, the development of the Tishman/Disney hotel/entertainment complex carries an obligation to the developer to make direct payments to the City and the State of payments in lieu of taxes (“PILOTS”).
TSCA has also invested $9.2 million in the renovation of the New Victory theatre, as part of their “public amenity package”. In association with this public amenity package, it is mandatory in the acquisition of six theatres by the 42nd Street Development Project Inc., that at least two of these are designated for not-for-profit activities, preferably as renovated theatres, such as the City’s first young person’s theatre at the New Victory.
Business benefits/in services
The redevelopment of the 42nd Street project area is steered very much towards public consumption and entertainment and the vision for the development is that it will provide facilities that can be shared by neighbouring office workers, visitors and the local community alike. However, the recent proposal of two major office developments may entail yet unknown improvements in services. In terms of public amenities and creation and improvements of open spaces, such as Bryant Park, the redevelopment programme has been substantial.
Spreading the benefits for the local community and businesses
Macro-benefits
In terms of the macro-scale impact of this project the benefits are more clear. The economic impact of this project for the City and the State, are likely to be enormous. Overall the project has been estimated to generate 49,000 permanent jobs state-wide with many more temporary jobs created during the construction phases (1,620 alone for construction of the hotel/entertainment complex). It is also estimated that the total project will generate within the region of $330 and $355 million in annual tax revenue, providing a much needed new revenue stream for the City.
The project will likely entail broader benefits in terms of reinstating the City’s international status as a world leading entertainment and media centre, further enhancing its popularity as a locality to visit. This “image reconstruction” is also anticipated to improve the overall attractiveness of the Times Square as a place to invest. This can be partially illustrated in the decision of financial consultants Morgan Stanley & Co. and German media company, Bertelsman to occupy the three office blocks in nearby 45th and 49th Street, which had formerly stood empty and bankrupt for over four years. The upturn in the property market for the four sites at the eastern end of 42nd Street, which encouraged the proposal of the Durst development, may also be partially attributed to the up-grading of the area’s cultural assets and associated image improvement campaign as ell s the new challenges now facing lower Manhattan.
Reclaiming this area as a place for families to spend time, as oppose to an area which due to its unsavoury reputation had formerly been perceived as exclusive and threatening, especially to women, adds an important new cultural assets to the city. As well as the provision of new events, the redevelopment of this area has gained substantial environmental improvements in terms of open spaces, lighting and general sanitation.
Micro-scale Impact
| |IMPACT |
|Environmental |The Seventh Avenue/ Broadway site for the four proposed office block, to be located directly over the |
| |Times Square, would best accommodate large-scale development. |
|Economic |Positive: |
| |Given the long-term trend in Lower Manhattan office market to absorb the proposed office development, no |
| |significant long-term impacts were expected on the midtown office Manhattan office market; |
| |Eliminating the unfavourable climate at the northern end of the garment centre will strengthen the |
| |wholesale function of the industry; |
| |The Theatre industry is expected to support, enhance and expand the theatre district and increase the |
| |audience potential; |
| |Reduced crime levels enabling shops to stay open later (incidents of serious crime has fallen 53% since |
| |1993); |
| |Negative: |
| |New legitimate theatres could increase competition with other theatres; |
| |Up-grading of moderately priced hotels could result in the loss of accommodation for budget-conscious |
| |tourists and businessperson. |
| |Displacement of existing uses (242 to date) |
|Social/ Residential |Concern over loss of single-room-occupancy units (SROs) – an estimated loss of 20,132 units. |
| |Significant rent increases within project area – an estimated 1,350 persons rented units are not covered |
| |by rent stabilisation and are not likely to be covered by rent control. |
| |Long-term status of the area’s homeless population is negligible, tied to public policy, but it is |
| |anticipated that the redevelopment will make the study area less hospitable for the homeless. |
(Final Supplement Environment Impact Statement, 1994)
Managing displacement and change.
Displacement
The 42nd Street Development Project Inc. acknowledged that a redevelopment programme on this scale was likely to have mixed impact on the relatively well established local business community. Since 1990, when the first phase of condemnation and redevelopment was proposed, 20 of a total of 280 business tenants effected have challenged the decision in court. In an attempt to accommodate these displaced businesses, with the exception of the sex shops, six full-time staff from the project team have been employed to help them find new premises. Of the 242 uses that have vacated their former location in the project area, the project team have been able to identify the new location of 146 uses (60% of the total). Of these, 75% relocated within the area, the majority nearby Times Square. Relocation expenses borne by the 42nd Street Project has been estimated to have totalled approximately $10 million.
The Final Supplement Environmental Statement (1994), concluded that the project “may accelerate development pressures in Clinton, a trend that threatens to displace low-income families. In terms of accommodating the displacement of local residents, the City and the state authorities has established a $20 million Clinton Fund, specifically targeted towards the provision of low-and moderate–income housing in the Clinton area which lies adjacent to the 42nd Street Project area. The Final Supplement Environmental Impact Statement, also made calls for the establishment of an advisory committee (including 15 community representatives) to identify and assist in mitigating negative impacts of the project and to work through the New York Department of Housing Preservation and Development (HPD) to preserve the present character of the community by constructing a rehabilitating subsidised housing.
To prevent existing residents from being forced out of the area the report also recommends the strengthening of the ‘Special Clinton District Regulations’, particularly with respect to anti-harassment provisions and to strengthen efforts by the Mayor’s Office of Midtown Enforcement (OME) to prevent tenant harassment, code violations and street nuisances in Clinton. Approximately $1.5 million of the total Clinton Fund was allocated to the Office of Midtown Enforcement and other tenancy advocacy groups in Clinton.
Accommodating Change: BIDs
The US Business Improvement District model (BIDs) has been applied to areas within the Project area (the Times Square Business Improvement District), to enable new and existing businesses to cope with additional numbers of visitors and to maximise on the potential they may bring. The purpose of the BIDs programmes are to enable property owners and tenants to provide services that supplement those that are already provided by the City. It does this through a mandatory special assessment levied on all the property owners in the BID area.
This system represents a prime example of what can be accomplished when the public and private sectors work co-operatively through shared resources to enhance services. The types of additional services BIDs typically provide are sanitation, security, maintenance, capital improvements and marketing.
In the case of Bryant Park, the BID programme has been fundamental in ensuring the longer-term commitment of the private sector in maintaining and serving this area, transforming the park from a drug gangland to a new office workers entertainment area. Over half of the maintenance and security costs for running the park ($17 million) are secured through the BID programme.
Key features and lessons
Entertainment-led Regeneration
The decision to instigate a renewal plan based upon entertainment and recreation development, following the collapse of the office market in the early 1990s, demonstrated quick and effective action on behalf of the City and the State. This plan required a clear vision, which has been strongly advocated by civic groups and organisations such as the Municipal Arts Association. The role of the Mayor is promoting this vision and setting the political and financial mechanisms in place to achieve it, has been fundamental to the success of the programme.
The decision to purse a culture-led approach to renewal, reflects a growing awareness of the importance of these developments in strengthening the city’s tourist base and cultural industries. In particular, it demonstrates the value of building upon an area’s existing or former strengths and highlighting what is distinctive about a place. This is most clearly reflected in the decision not to tear down existing buildings, such as the Victory Theatre, but to renovate them to their former glory.
This illustrates an awareness of the need to create mixed uses in an area where property values generally favour high profit office developments. The proposal to create a mixed urban environment has been based on an understanding of the needs of office workers both within and adjacent to the Project area, to gain access to high quality entertainment and recreation facilities. The marriage of these functions are viewed by the 42nd Street Development Project as essential to the development of a sustainable office development, catering to the needs of existing businesses whilst attracting new businesses to the area. The request for mixed uses within individual developments (such as the Tishman hotel complex or the Durst skyscraper), with retail and recreational uses on the ground floor, has also been vital in ensuring that the area remains open and hospitable to office workers and visitors alike.
Through reinforcing and promoting the traditional strengths of this area, wider benefits have been sought in terms of radically reconstructing the image of this area, not only boosting ticket sales locally, but adding to New York’s international recognition as “the city that never sleeps” and improving the overall attractiveness of the area as a place to live and work. The role of the 42nd Street Development Project in reconstructing this image has been instrumental through its ongoing marketing campaigns.
Process
Partnership lies at the heart of this renewal programme. In particular, the co-ordination of activity between the different tiers of governance and the private sector, have been acknowledged. As stated above, a strong vision and commitment from the Mayor, has been fundamental in pursuing this redevelopment of 42nd Street in such a relatively short timespan. Once the vision had been established, through the “42nd Street Now!” plan, redevelopment of the key sites has been rapid.
Much of this progress can be attributed to TSCA who provided most of the initial clean up costs through their ‘Letter of Credit’ to the City. However, the establishment of an arms-length development agency, the 42nd Street Development Project, has been critical in co-ordinating and overseeing the implementation of the project. Most significant, has been the designation of enhanced planning powers, through the condemnation and acquisition of sites and granting of local development control powers delegated by the EDCs. The City EDC’s substantive use of tax incentives and breaks has been highly effective in encouraging private investment into the development process and encouraging major companies, such as Disney, to locate in the poorly perceived area.
The key co-ordinating role between the EDCs and the BIDs has been essential to building the momentum in the latter stages of the project.
The role of civic groups and organisations have also been instrumental in ensuring that quick action is taken to reinstate the popularity of this area for all New Yorkers and exerting pressure to ensure that an appropriate form of redevelopment was selected that benefits both local and the wider community (for example the TSCA “public amenity package”).
Management
The establishment of the Times Square BID programme ensures that longer-term management and sustainability of the project by creating a continual stream of revenue for the area in terms of maintenance and servicing after the EDC has done its work. Planning gain has also been used to secure longer-term benefits, in terms of infrastructure provision and financial gains to the City and the State.
Attempts to minimise the impact of displacement to local businesses (other than those associated with the sex industries) have also be implemented by the 42nd Street Development Project in their by employment of six skilled staff to assist local businesses to relocate. In accordance to the recommendations of the Final Supplement Environmental Statement, substantial efforts and resources have come from the City and the state to mitigate the negative impact of the project on existing local residents, introducing rent control legislation and anti-harassment and ensuring the provision of low-and medium- income housing within the wider project area.
Ends.
Bibliography and Credits:
G Clark and J Parrott: Economic Development in London and New York, London/ New York Study, 2000.
Greater London Enterprise: Managing the Impact (of Urban Regeneration), London, 1998.
New York City EDC, Various Materials and Background Information.
The 42nd Street Development Project Inc: Various Materials and Background Information.
Toronto.
Introduction.
Toronto is an interesting case study. Firstly, Toronto is Canada’s largest city (with almost 2 million people within the city boundary, and a further 2 million in the wider metropolitan area), is growing very fast, and is the most multi-racial city in north America. Toronto identifies it’s multi-racial make up as a key competitive element in the global economy. Secondly, Toronto underwent a metropolitan reform process in 1998 and consolidated 6 municipalities into one big city, but was widely recognised not to have done this as successfully as it might have done, especially in that the consolidation left out the wider fringes of the metropolitan area. Thirdly, in the reorganisation functions that has followed, the existing city development agency (Toronto Economic Development Corporation, TEDCO) was widely regarded to be too limited in scale (focussing only on the old docklands) and has not been empowered to grow. Instead, the new City of Toronto has built a strong Economic Development Office within the City Government, and is now embarking on revising the role of TEDCO to principally address waterfront regeneration, a major development programme across the shore of Lake Ontario. Toronto has also built up an exemplary ‘cluster based economic development strategy’ which it is now seeking to implement.
In terms of city development agencies this case study demonstrates the dangers of an agency having too limited a role. Conversely, the case study also demonstrates that a pro-active ‘business facing’ Economic Development Office within city government can mange most of the economic development process other than the management of key redevelopment sites which it is leaving to a reformed agency in due course. The revision of the old TEDO and creation of the new agency is just beginning.
Key issues from this case study might therefore be:
Weak development agency being reviewed and restructured.
Pro-active economic development office in City Government fulfilling most ‘development agency’ functions.
Exemplary cluster based economic development strategy.
People and human capital at the centre of strategy.
Advocacy for more public investment a key aspect of the strategy.
Quality of life as key driver.
Background.
The Toronto economy has been at the forefront of profound transformation over the past 10 years. Free trade, globalisation and the rapid development and dissemination of advanced information and communication technologies have fundamentally changed the global economy. Through all of these developments, Toronto businesses have adapted and emerged as strong contenders in the work economy.
Toronto has to a large extent shed its old routine, mass-production economy and developed one based on advanced services, high technology, cultural industries and innovative specialty manufacturing.
The focus has shifted from trading in protected, but limited, Canadian markets to the unprotected and unlimited international arena. In 1981, the value of Ontario exports to the rest of the country was about equal to international exports valued at close to three times those to the rest of Canada. An estimated 92 per cent of Ontario’s international exports now go to the US, representing 43 per cent of the provincial GDP.
Toronto Benefits From a Diverse Economy
Unlike many cities whose economic fortunes are tied to one or two major industries, Toronto has a broad array of successful manufacturing and services clusters. Other international cities strive for the economic diversity that Toronto has already achieved.
Toronto’s long history as a centre for trade, manufacturing, finance, research and development, and its famed high quality of life is evident in the success of the 10 industry clusters assessed and benchmarked in Toronto Competes (a background report prepared for the Economic Development Strategy): Aerospace, Apparel and Fashion, Automotive, Biomedical and Biotechnology, Business and Professional Services, Financial Services, Food and Beverages, Information Technology and Telecommunications, Media and Tourism
Toronto is outperforming the North American Average in Terms of Job Growth
In many of Toronto’s export clusters, the Toronto region outperforms the North American Average in terms of job growth. For example:
▪ Toronto has the single largest Biomedical and Biotechnology cluster of any metropolitan area in North America. The success of this cluster is strongly linked to leading-edge knowledge and research capabilities. The University of Toronto, for example, has the largest faculty of medicine in North America.
▪ Business and Professional Services cluster is one of the largest in North America and is growing more rapidly than its American counterparts in New York, Los Angeles, Philadelphia, Boston or Washington.
▪ Toronto’s Food and Beverage cluster is the largest manufacturing industry in the city. Businesses within Toronto specialise in innovative product development tied to our diverse multicultural communities, tourism and a competitive and entrepreneurial restaurant industry.
▪ Toronto’s Information Technology and Telecommunications cluster is larger that New York’s or Los Angeles’ and is unique in its strength in both hardware and software
Toronto is well positioned for Success in the Knowledge economy
In advanced economies, the generation of new ideas and the translation of these ideas into innovative products and services of superior quality are the primary way economic value is added. Toronto has a high quality of life and a rich legacy of investment in education, research, technology and culture; precisely the elements necessary for success in the knowledge economy. All of the basics are in place.
Toronto is the knowledge centre of a region and has the critical mass of creative people necessary for the innovation to flourish. More than 100 languages are spoken and over 50 per cent of the city’s labour force has a university degree or community college diploma. Toronto’s diversity and strong concentration of highly skilled workers are tremendous competitive assets and driving forces behind its economic success
The City of Toronto Economic Development Office
The City of Toronto Economic Development Office offers a wide range of services designed to help business succeed. Toronto’s Economic Development services support and assist existing businesses, potential investors and business associations.
▪ It responds to investment inquiries with data and advice, and work with site selectors to promote new investment in Toronto
▪ It has key information on key industry clusters, provides statistical data and undertakes economic research to help businesses stay competitive.
▪ It manages capital improvements and works to establish and assist Business Improvement Areas.
▪ If a business is at the start up stage of business growth, entrepreneurs can contact one or the ‘Enterprise Toronto’ offices for information and assistance.
▪ The Tradelink Office at the National Trade Centre has a wealth of information to assist with importing and exporting.
▪ The Toronto Film Office promotes and supports Toronto status as an international film production centre
Identifying sites and buildings, assisting with approvals to accommodate growth, expansion and relocation, and advocating for business.
Toronto’s Economic Development staff assists businesses through:
• Municipal processes
• Help to interpret planning and zoning regulations
• Advocate on behalf of business to assist with site location information
Through direct contact, interaction with businesses, business and sector associations, and the real estate community, the office informs clients about municipal issues, policies and programs that affect business operations, respond to questions, and voices business concerns.
Responding to investment inquiries and working with site selectors to attract new investment.
The Economic Development Office promotes Toronto’s business advantages and services. It tries to keep Toronto ‘top of mind’ for businesses making investment decisions. It publicises business successes, events and issues. It publishes statistics, information brochures and identifies contacts to keep local businesses current.
The Economic Development Office works to bring investors and new businesses to Toronto and also analyses and reformulates alliances with international sister cities. It taps into the investment potential of sister city relationships by facilitating direct investment in Toronto and marketing local products abroad.
Accessing information on key industry clusters.
Toronto’s Economic Development team provides specialised business knowledge and information on Toronto’s key industry clusters including
• Information technology and digital media
• Biotechnology and pharmaceuticals
• Tourism
• Financial and business services
• Call centres
• Fashion and apparel; and
• Food, Beverage and packaging
Importing and Exporting.
Toronto’s Economic Development Office assists businesses to access government export assistance and services and introduces businesses to key contacts and advisors in the field.
‘TradeLink’ is a combination of Economic Development space and programming at the National Trade Centre in Exhibition Place. TradeLink facilitates inbound and outbound missions and participates in trade shows to introduce Toronto businesses to the world.
‘TradeLink’ has a permanent information centre on exporting and importing, offering businesses, exhibitors and visitors to NTC a one-stop-shop information service about international trade exporting financing and foreign markets. There are experienced International Trade Advisors on had to assist Toronto firms to initiate and grow their export business providing advice on market strategies.
Assisting business start up growth.
The Economic Development Office assists small business, stimulating entrepreneurial development, and revitalising commercial and industrial employment areas. Economic Development Office manages ‘Enterprise Toronto’, an innovative public-private alliance assisting entrepreneurs and small business. Its four business centres provide direct assistance to those starting or growing and early stage business.
Establishing and maintaining Business Improvement Areas and managing Capital Improvements.
The City of Toronto cost-shares capital improvement in designated retail Business Districts and traditional employment areas. The creation and facilitation of local partnerships is supported by the city to leverage human and financial resources, address economic issues, and stimulate reinvestment and employment at the same time.
Supplementary programs in Streetscape Improvement, Commercial Façade improvement, Banner and Mural, Commercial Research, and Community Festivals and Special Events are also offered. These supporting programs provide the tools to attract visitors and new customers to commercial areas throughout Toronto.
The Economic Development Office provides administrative support and advice to the City’s 39 Business Improvement Areas and works with local businesses and community groups to ensure economic stability and growth in 19 employment revitalization areas.
Economic Development Office staff work with the Toronto association of Business Improvement Areas (TABIA), an umbrella organisation, to address and resolve ongoing issues and concerns of Toronto’s BIAs.
Providing statistical information, developing policies and business advocacy.
The Economic Development Office maintains up-to-date and comprehensive economic information and business-related statistics to assist businesses in making well-informed decisions. The Economic Development Office maintains a directory of business data with key contacts and responds to investment inquiries with customised information.
Toronto’s Economic Development team voices the concerns of business to civic decision makers, and influences government policy to assist with business growth. Key resources include information about city businesses and a directory with key contacts and area profiles.
The Economic Development team provides advice to Council on proposals and projects of major economic significance, provides economic impact analyses, as well as advises on tax and other major government policy issues, significant event proposal/bids development applications with city-wide implications and strategic infrastructure initiatives.
The Economic Development staff work with business and other stakeholders to create long term economic development strategies to facilitate economic growth and develop new and creative ideas that could benefit the city’s economy.
Promoting Toronto as an international film-production centre.
The Toronto Film and Television office (TFTO) co-ordinates filming for thousands of shooting days for hundreds of features, documentaries, commercial, music videos and corporate videos each year. TFTO staff aim to increase the film and television business in Toronto by being aware of new projects, as they are being developed and following up on leads through meetings with producers to encourage them to consider Toronto for their next project.
TFTO co-ordinates location filming with use of their new on-line permit. Knowledgeable TFTO staff are on hand to provide advice and assistance to production and industry-related service companies, and liaise with the public and media regarding industry related inquiries, and to provide referrals for accommodations, transportation and personnel.
The Toronto Economic Development Strategy.
Background
The Economic Development Strategy was developed in partnership in 1999. City Council charged a Steering Committee comprised of public, private sector, labour interests and the Economic Development Office with developing a new approach to advance the economy of the new metropolitan city – the amalgamated City of Toronto.
It is based upon consultation and detailed research. An ongoing process of consultation and feedback with a broad range of business and community groups was undertaken to capture their ideas, views, issues and suggestions as key inputs to the strategy. The City commissioned an international team of experts to evaluate the performance of out key industry clusters and benchmark the Toronto economy against competitors around the world.
Toronto Competes: An assessment of Toronto’s Global Competitiveness was the product of this research and contributed significantly to the strategy.
The role of the Economic Development Strategy.
This strategy is a framework for future action. The report lays out the rationale and approach to a new Economic Development Strategy for the City of Toronto. It provides a framework for action to support Toronto’s future economic prosperity and long – term fiscal competitiveness. It is not a work plan, in that it does not assign specific tasks to specific organisations. Rather, it proposes strategic directions to focus the attention and energies of all stakeholders in a common direction, suggests priorities which should be the first focus of this effort, and challenges everyone to jointly develop and implement specific actions plans.
This strategy will not be implemented by the City government acting alone. The strategy presents a vision of relevance to the broad range of organisations and individuals with an interest in Toronto’s future. The City Government believes that no single agency can take on the breadth and depth of actions necessary to advance the City’s economy. It wants to harness the collective know how, skill, resources and energy of the private sector, labour, volunteer sector, all colleges and hospitals, and communities working in concert to achieve the goals articulated in the strategy.
This strategy will benefit the Greater Toronto region. The strategy recognises that the City and the surrounding regions comprise a single interdependent economic entity. It seeks to advance the economy of the City in a manner that also serves to benefit the economy of the whole region.
It asserts that Toronto has the critical mass of cultural diversity, world-class institutions, internationally competitive financial and professional services, and industry specialisations necessary to generate and nurture creative ideas in a number of strategic industry clusters. The surrounding regions have strengths in producing and distributing these outputs.
The strategy recognises the direct link between a strong economy and a high quality of life. A strong economy provides the financial resources necessary to support and improve social, environmental and community services and programs, and provides the public and private infrastructure required to sustain quality of life. A high quality of life, in turn, is seen as making Toronto a great place in which to live, work and invest.
The Economic Development Strategy is one of a series of strategic policy documents (Environmental Plan, Cultural Plan, Official Plan and Social Development strategy) prepared under the umbrella of City Council’s Corporate Strategic Plan to guide decisions-making in the City.
Economic Development Goals.
The principal goal of the Economic Development Strategy is to improve the liveability and quality of life in Toronto through economic growth that creates high quality jobs, generates wealth and investment and helps to ensure the City’s long-term fiscal health.
There are 8 key messages identified in the Strategy:
• Think differently about competitiveness and Toronto’s new role in the global marketplace.
The research and consultation undertaken for the strategy clearly articulates the need to ‘think differently about competitiveness and Toronto’s role as a world city’. Toronto wants to update old models and approaches to stimulating economic growth. All the tiers of the government: Federal, Provincial and the City itself, are encouraged to reframe their thinking of Toronto: from an Ontario, or Canadian, city of note, to one of a very limited number of ‘world cities’.
Toronto is seen as being at a critical juncture. There is an urgent need to reinvest in the City in order to ensure sustained economic growth. Failure to recognise the changing economy and to improve Toronto’s global competitive position by building on it’s unique attributes are seen as constraining economic growth, not only in Toronto, but also regionally, provincially and nationally.
• People power the knowledge economy.
In the strategy economic growth is seen as being driven by knowledge, skills, innovation and entrepreneurship. At the source of these attributes are people, the strategy focuses on human capital. The strategy recognises people as the new focus for economic growth and expands traditional economic development, to include new approaches to producing, preparing, retaining and attracting a labour force with the skills necessary for success in the knowledge economy. The source of Toronto’s distinctive capability in many clusters is seen to flow from the city’s astounding degree of ethnic and linguistic diversity.
• Added value comes through innovation and design.
The strategy argues that in advanced urban economies, the generation of new ideas, and the translation of these ideas into innovative products and services of superior quality, are the primary ways economic value is added. Whether in manufacturing or services, the potential for Toronto is seen as coming through the use of advanced design and new technologies.
The strategy argues that innovation stems from creativity; creativity in turn stems from the vibrant and diverse culture great cities foster. The strategy recognises that the rich diversity of creative talent and cultural expression within Toronto’s arts and culture communities adds to the City’s ability to retain and attract knowledge workers.
• Quality of place attracts people and investment.
The strategy asserts that, although people power the knowledge economy, ‘quality of place’ is a critical factor in determining where people, particularly knowledge workers, choose to locate and invest. While Toronto has a long-established and well earned reputation as ‘the city that works’ – a safe, clean, attractive and well-managed city that makes it one of the best cities in the world to live – the City cannot rest on it’s laurels. The strategy suggests that Toronto must continue to invest in, and improve the quality of, its built and natural environment, in order to remain on an equal footing with other cities that benefit from massive reinvestment efforts by their state and national governments. The strategy views the city’s neighbourhoods, parks, ravines, schools, theatres, museums, galleries and urban design, as well as it’s employment areas, roads, streets, sidewalks, public transit and other social infrastructure, as strategic assets that can be leveraged to support economic growth and provide a competitive advantage over other jurisdictions.
• Fiscal sustainability is fundamental.
The strategy argues strongly that ensuring the ongoing fiscal sustainability of the City is critical to competitiveness, economic growth, and quality of life. Building a great city, it says, requires investment resources. Toronto faces a number of fiscal challenges, which impact the City’s ability to attract the people and investment necessary to fuel a strong economy. Increased municipal responsibilities, growing demands on municipal budgets, heightened competition from cities across the globe – all point to the need to develop and implement long-term revenue generation and expenditure plans. Internationally, Toronto is clearly cost-competitive, but at the local level, intra-regional property and education tax differentials remain to be addressed.
Stimulating industrial and commercial expansion is seen as essential to ensuring the city’s long term fiscal sustainability. The strategy seeks to do this in a number of ways by improving the climate for business investment. Higher tiers of government are identified as needing to recognise the imperative to provide additional stable funding, authorise new tools and new sources of revenue, and develop long –term funding programs to deal effectively with the new set of realities Toronto faces.
• Competitive export clusters and a strong local economy sustain a vital cycle of economic growth and prosperity
The performance of the Toronto economy is seen as being determined by the competitiveness of the region’s export clusters – sets of inter-linked industries and institutions whose final production reaches outside the region. Exports bring new wealth into the region which is then circulated among local businesses and their employees through contracts and incomes. Whilst export clusters bring new wealth into the Toronto region, local businesses create the vast majority of jobs. The quality, diversity and vitality of local businesses, therefore, are key to the city’s overall economic and social well-being.
The strategy defines a common economic platform – human resourced, research and development, financial capital, physical infrastructure, business climate and quality of life – that supports both the export (traded) and local (non-traded) sectors of the economy. The strategy focuses increased attention on the key role played by export-orientated industry clusters in a manner that supports local businesses and strengthens the region’s economic foundations to build a vital cycle of economic growth
• International recognition and brand identity are essential.
The background work prepared for the strategy concluded that Toronto may be the best positioned City in North America heading into the 21’st century. Unlike many cities whose economic fortunes are tied to one or two industries, the Toronto region has a broad array of successful manufacturing and service clusters. In most cases, these clusters are outperforming the North American average in terms of job growth.
The Strategy recommends Toronto to actively promote and ‘brand’ the city, both locally and around the world as a vital, globally connected, centre of innovation, creativity, excellence and investment opportunities.
• Mobilising the collective resources will power our prosperity
A big part of the challenge of the Toronto Economic Development Strategy is to make better use of the considerable resources that exist in the Toronto community. This means two things; first to conceive and then act upon a common vision of the City’s economic future. Secondly, the City administration, other governments and public agencies, the private and volunteer sectors and labour interests must create ‘an alignment of strategic intent’ and forge new partnerships to implement this vision.
Miami.
Introduction.
Miami is an interesting case study for all cities interested in the substantial challenges of urban revitalisation. It is a city that suffered extensive disinvestment and urban blight over a 30 year period but started to bounce back in the 1990s due economic globalisation, multi-racial immigration, and the development of a pan-American trade block. This is providing it with the scope to become a major ‘global city’, providing advanced financial and business services to inter-American and Caribbean trade, supported by a vibrant range of smaller multi-ethnic trading companies, and the parallel development of a major multi-cultural creative industries and media hub. Miami is a new world city, and sees itself becoming ‘the capital of the Americas’, acting as the global city for Central America and Caribbean region.
But this case study involve two stories. Firstly, that of exceptional economic and population growth across the city as whole, fuelled by effective positioning to benefit from economic globalisation and an ‘open door’ policy on immigration. Secondly, the major challenges involved in inner city revitalisation, and the patience required by the city development agency to effect it.
Key features on interest in this case study include:
▪ Major redevelopment attempts the inner city led and directly managed by a city development agency.
▪ Major consultation activities integrated at all stages to improve effectiveness and accountability.
▪ Use of a wide range of fiscal and financial tools to leverage public sector funds with private sector co-investment.
▪ Tackling of severe blight and slum dwellings through mixed used developments including housing, leisure, small business, and office.
▪ Metropolitan Government reform as a trigger for new economic development planning efforts.
▪ Tackling perceptions of very high levels of crime and lack of safety in the central city.
▪ Tackle racial inequality and civil unrest.
▪ Central city redevelopment to enlarge capacity for regional economic development.
▪ Building upon the strengths of diverse multi-lingual entrepreneurs.
▪ A city development agency and metropolitan economic development partnership working together.
▪ Combining tourism and creative/cultural industries with development in Finance, Business, and other Producer Services.
Background.
The City of Miami sits within Dade County, and is one of 32 separately designated cities and municipalities within the metropolitan area. The metropolitan county has a population of nearly 2.5 million people and is one of the fastest growing populations in north America. Immigration over the past 40 years has given Dade County (metro Miami) an ethnic and linguistic composition which is the most diverse in the USA. The population is 57% Hispanic (of which 26% are black Hispanic) and 22% African American. Immigration from Latin America and the Caribbean has been the main source of population growth and this has included significant numbers of entrepreneurs and small business managers who have come to Miami to operate businesses connected to international trade.
The population growth has been met with the significant growth of small businesses engaged in trade and logistics management, finance, insurance, ICT, business services, creative industries including film, TV, music, and fashion. Improvements in education levels have also attracted major investment from larger companies including ICT, Automobiles, and Food. Miami’s Port is the busiest cruise port in the world and this underpins the continued growth of Miami as a holiday destination, but now with a greatly diversified offering for a wide range of income groups.
Community Redevelopment Agency.
This agency was formed in 1982 to oversee the redevelopment process of the inner city. This substantially involved addressing a series of the poorest and most blighted inner neighbourhoods close to the CBD but suffering from high levels of unemployment, crime, drug addiction, and poor health. The CRA has made slow but patient progress on the redevelopment of these neighbourhoods and the case study below identifies the many challenges of revitalising this kind of community. In particular, the CRA has utilised Fiscal, Planning, and Land Management tools to achieve redevelopment but has suffered from weak decision taking and insufficient political support to carry out its mission rapidly.
The Beacon Council.
This metropolitan economic development partnership was formed by Dade County, a number of the local cities, including Miami, and Private sector Partners in 1986. It has been an effective promoter of Inward Investment, Entrepreneurship and Trade within Metro-Miami and has grown in size through the success of recruiting many private sector partners.
Metropolitan Reform.
In 1996, the people of Dade County voted to create a strong county wide government, to sit on top of the 32 municipalities and Dade County/Metro-Miami elected a strong executive county Mayor (Alex Penelas) to lead it’s growth efforts. The creation of this strengthened tier of metropolitan government has had the effect of galvinising economic development and growth efforts and has played a key role in managing growth effectively through much of the urban county. It has also provided a stronger public sector partner for economic development efforts with the Beacon Council.
The Economic Summit and Strategy.
In 1996 and 1997, immediately following his election, the Mayor launched a consultation and visioning process with then people of metro Miami, in partnership the Business Community (appointing Jay Molina, a key business figure, as his co-chair) that culminated in an Economic Development Summit involving 3000 people which set out to create a new metropolitan Economic Development Strategy for Miami.
The Strategy, which is now being updated focused on three dimensions:
Sectors.
Roles.
Infrastructure.
Economic Sectors.
The Strategy sets out 7 sectors in which Miami will seek to grow it’s jobs base. These are:
Finance and Business Service.
Trade facilitation and logistics.
Tourism, Hospitality, and Food.
Creative Industries (Fashion, Film, Media, Music, TV).
ICT.
Education and Health Care.
Advanced Manufacturing.
Functional Roles.
The Strategy also sets out 7 key roles that the city wants to play in the international economy.
Gateway City.
Logistics Hub.
Market Place.
Seat of Learning.
Visitor Destination.
Entrepot.
Meeting Place (Conventions and Diplomacy)
Infrastructure and Development.
The strategy sets out the necessary improvements it wants to make to position the county effectively to take advantage of the opportunities.
Educational attainment.
Urban revitalisation.
Improvements in Public Health.
Image improvements and reduction of crime.
The Strategy preparation process was one of the most inclusive that has been reviewed. The Strategy was simple to understand and provided clear guidance to the economic development and other revitalisation processes. It helped Metro-Miami to mange growth better and to seek to tackle weaknesses more clearly.
Detailed Case Study Inner City Redevelopment and the Community Redevelopment Agency.
In the late 1960s, the City of Miami realised that the emergence of downtown Miami as a major centre for international commerce and the construction of the Dade County Rapid Transit system had created an environment conducive to the physical, economic and social revitalisation of the downtown community. As a result of the 1980 Civil Disturbances and the influx of a large number of Cuban immigrants, the city started a number of initiatives to improve the physical, economic and social conditions in its inner city neighbourhoods.
The city of Miami undertook Major Planning Studies within it’s downtown community and produced three master plans that included all levels of government and private sector input. The Studies concluded that in order to maximise the public benefits that can be obtained from its investments, a public-private redevelopment process would be necessary. The Planning Studies produced material that related to basic zoning, design, financing, management, development mix (commercial and residential), public improvements plus cultural and recreation. The major recommendations from all three Planning Programmes were further refined and incorporated into the final document which guided the management of the Community Redevelopment Agency (CRA).
Several areas within central Miami had the same common characteristics, underdeveloped land, slum and blight, a threat to public health and safety and a strong mandate from the communities to make meaningful improvements. The redevelopment areas that are being revitalised are in the fringe sectors of downtown Miami and are represented by four major sectors within their boundaries:
Overtown
A predominately black community that has suffered from a lack of investment, condemnation and relocation in order to make way for improved transportation corridors, and mostly of low income tenements represented by absentee landlords.
Parkwest
This is a commercial area immediately east of the Overtown community, which contains a variety of declining small businesses. It’s population is characterised by a concentration of low income and transient residents many with severe social problems.
Omini West
This sector is a composition of declining commercial and residential structures with over 75% of the more than 100 housing units are need of major repair or demolition. There are 70 parcels of vacant land mostly used for outside storage of inoperative vehicles, machinery, and trash, making the area not only unsightly but potentially unhealthy as well.
Omini East
This sector differs from the land in Omini West in condition and land use. Omini East has water front advantages, however, like the West Side, it is under developed with many structures that should be rehabilitated or demolished. Although the area contains some up-scale residential and commercial facilities, the county government as well as the State of Florida have verified that the area is experiencing high level of distress, lack of investments and economic decline.
It was recognised that to reverse the decades of disinvestment and resulting blight would require a long-term programme. There was recognition from all those concerned for the need for a targeted and high impact strategy which included significant levels of investment in major commercial and industrial development projects, the creation of significant numbers of jobs and an unprecedented commitment and public investment of funds to meet the severe infrastructure needs.
Management approach and philosophy
Miami’s Redevelopment Programme which is managed by it’s Community Redevelopment Agency (CRA) is based on a neighbourhood revitalisation approach that incorporates a co-operative, comprehensive, and sequential development process. It is co-operative due to the fact that it requires active involvement of the local government, the private financial and investor sector, and the affected community. The basic concept is the removal of slum and blight and to assemble enough marketable land for development and private investment.
The CRA’s role is to act as catalyst to induce public and private interest in the future of the area. Within this approach it is important that the local government that sponsors the Agency understands it’s catalysing role in developing the preconditions conducive to private investment. Without private investment it is doubtful that success can be achieved in a meaningful way. A firm commitment was made to the business community and private investors to stimulate interest in the process. A major diplomatic effort was put forward to explain that the redevelopment effort is not a social programme, but is essentially economic in nature, requiring the full support of the community.
Managing the implementation process
Creating a City Development Agency (Community Redevelopment Agency).
Early in the planning process the City of Miami realised that the most crucial element of the entire effort was to consolidate the initiative under a single management system that would be responsible for the complete implementation process. The primary function of the entity is to co-ordinate all elements of the redevelopment process, which includes but not limited to government, private, and community involvement. The management system is set up in such a way that the private sector for the most part is void of dealing with the governmental bureaucracy.
In order to comply with the necessary legal prerequisites, the City of Miami and Dade County in 1982 declared the Overtown/Park West a redevelopment district and subsequently in 1987 declared the Omini area a redevelopment district. The legal framework under which the Miami CRA was formed is enabled by state legislation that permits a Community Redevelopment Agency (CRA) to be set up by local government to access a variety of tools (bond financing, condemnation, investing, construction, investor financing, etc.) necessary for successful implementation.
There are several characteristics that distinguishes Miami’s management system from local government agencies or private sector organisations:
▪ Administrative autonomy combined with some degree of political accountability;
▪ The legal status of the Community Redevelopment Agency is on a non-profit basis and with the ability to utilise many of the functions of private enterprise, which are otherwise prohibited to government under most state and local statues;
▪ The governing board of directors is generally a mix of public and private officials as well as ex-officio members from local government agencies.
However, the City of Miami and Dade County did not create an effective partnership Board and agency Board was constituted with elected officials from the city of Miami. This limited the CRA’s ability to induce capital leverage from local investors and lenders. It did enable the agency to acquire a substantial amount of public seed capital for basic infrastructure improvements, bond financing, and funds for development start-up. It was the City’s funds that supported the initial residential, sports facility, highway improvements open-space enhancements and improved public services.
Planning the Redevelopment Process.
The City of Miami undertook three major planning programs, which addressed development opportunities for the Downtown Miami fringe area. While there has been some minimal private investment within the areas, there has been a continuous pattern of disinvestment and abandonment within the redevelopment district. In order to maximise the extensive public investment in the rapid transit system and infrastructure investment, a public-private redevelopment process was necessary. Citizen advisory groups were established to provide input into the master plan and to participate in the ongoing activities of the redevelopment implementation.
A Master Redevelopment and Revitalisation Plan was produced and agreed upon by the City of Miami, Dade County and the Community.
The Redevelopment Plan served as a guide for the CRA and gives the public a general concept of the development that will take place. It includes but is not limited to:
Land use and zoning plan;
Traffic and transportation plan;
Community and service plan;
Economic development and housing plan;
Land acquisition and reuse plan;
Relocation plan;
Minority participation plan;
Financing plan;
Management plan;
Historic preservation plan.
The plan was designed for a fifteen year period with updates every five years.
The general redevelopment concept for the project area was to provide a wide range of housing opportunities within a Downtown setting, including support uses necessary to serve the area's future population. During the ten to fifteen years, the area is being transformed from a neighbourhood of blighted and marginal residential and commercial uses into an integral component of Downtown Miami. As Miami rapidly expands its position as an international centre for finance and trade, the Downtown area is experiencing new growth and vitality. Projections identified an increase of the employee population in central Miami from 72,000 employees to 156,000 employees between 1984 and 2000, primarily due to a continued strong expansion of the office market.
The emerging new Downtown is becoming a balanced community with retail, office, cultural, recreational, and residential activities. The redevelopment program provides resources for residential development within the Downtown core area, an essential ingredient for the establishment of a viable Downtown that moves beyond the 9-to-5 routines. Unless Downtown Miami becomes a core of a broad range of residential activity, it will never achieve its comprehensive objective as a liveable city within an international community.
Role of the City Development Agency - Phasing and Sequencing.
Project implementation, particularly the initial phase, was co-ordinated and designed in such a manner as to create sufficient critical mass to change perceptions about the project area and to support the significant public investment programme required.
The City of Miami, through the CRA, assumed the financial and redevelopment responsibility, while Metro-Dade County assumed some of the land acquisition and residential relocation responsibility. The County has also taken the lead role in developing the Performing Arts Centre using a portion of the tax increment trust funds to bond the infrastructure cost. Projects that are not public facilities in nature and traditional public/private joint ventures. The City assumed some of the costs and risks normally borne by the private developer.
This redevelopment area is one of the largest joint private/public undertakings in Florida; the City of Miami estimated that over $200 million in local public funds would be needed to leverage approximately $1.75 billion in private funds during the 10-15 years. Public sector involvement is focused on land acquisition, relocation, demolition, project marketing, construction of public improvements, parking facilities, and the provision of gap financing where warranted.
Selecting the First Projects (Phase 1)
Because the project area is unusually large (580 acres) it was important to select the initial development carefully so as to maximise the public investment and to complement existing developments and marketable sites within the project area. Land assembly, business and residential relocation was completed on the first 29 acres (9 city blocks) to be used in phase 1. It was the opinion of the CRA that the initial stages of development should be centred on a major transit station that had federal, state, and local support. Because the transit station is closest to the government centre and the central business district, the site's marketability presented an excellent opportunity for development
There are certain activities that occurred within, and directly adjacent to, the project which further reinforced its development potential, including:
▪ the on-going expansion of the Downtown Government Centre, which will eventually increase the employee population to more than 15,000;
▪ the identification of a nine-block Transit Station Impact Area, selected due to its strategic location (adjacent to the Overtown Transit Station and the Downtown Government Centre), as the location where public investment was to be concentrated. Redevelopment within this area would maximise benefits of the project area and leverage previous capital improvement expenditures plus committed public funds. Preliminary calculations indicated that this nine-block area was capable of supporting the development of 1,875 residential units and 250,000 sq.ft. of commercial space;
▪ the Overtown Transit Station itself is one of only three stations serving the Downtown and Brickell area;
▪ the Downtown component of Metro rail (Metromover), which links major portions of the project area directly to the rest of the Central Business District;
▪ the continued expansion of the Port of Miami, which ranks as the world's largest cruise port, serving in excess of 3,000,000 passengers annually.
Role of the City Development Agency - Managing the Development.
To insure uniformity of the public purpose the development sites were acquired by and titled to the CRA. The cost of demolition, relocation, and public improvements were also the responsibility of the CRA. All of the structures on the assembled land were too dilapidated to restore and would have cost more for restoration than building new. The development of the public planning documents, such as development of regional impact studies (DRI), marketing studies, urban design guidelines, and bid solicitations were all managed by the agency to insure compliance with the public purpose. The redevelopment plan was all-inclusive as to the conceptual results that were to be achieved.
As planned, the CRA’s participation during Phase I of the redevelopment focused on public investment adjacent to the Overtown Transit Station. Housing development during Phase I was geared towards families with annual incomes ranging from $15,000 to $50,000. A mixture of home-ownership and rental housing was built to attract an expanding Downtown employee population.
Funding for Phase I redevelopment was provided through a number of sources, including a grant from the Federal Government’s Urban Mass Transit Administration, City of Miami General Obligation Housing and Highway Improvement Bonds, a loan from the federal government through the HUD Section 108 Loan Program, a grant from Metropolitan Dade County, a private loan from the Florida East Coast Railway, the State of Florida, $10.2 million federal grant, and tax increment revenue bonds which is repaid from increased tax revenue as a result of the new developments
Through resolutions sponsored by the CRA and passed by the Miami City Commission, three citizen participation groups were established and given the authority to involve themselves in the reviewing of the activities going on in the area. The three community groups are known as:
Overtown Advisory Board, Inc.
the primary function of the board was to assure that the concerns and interest of the Overtown community were included in the implementation of the redevelopment activities. Their member included: Overtown residents, property owners, community-based organisations, institution representatives, and professional committed to the revitalisation of the Overtown community.
Park West Association
this association was comprised of business persons and property owners concerned with the improvement and general welfare of the Park West area.
Omini Citizen Advisory Committee
the Committee was established to provide input to the Master Plan for it’s area. This group included representatives from the Omini neighbourhood and provides a forum where interested citizen, civic leaders, and public officials joined forces to address development issues and community concerns.
In as much as the three groups were involved in the planning and implementation process each of them required a different type of co-ordination, and had different agendas. The CRA was responsible for co-ordinating all of their concerns, and served as a liaison between them and the city and county commissions. The CRA was charged with insuring community involvement in an organised fashion.
City Development Agency Achievements.
The first stage of development, which took fifteen years, did produce tangible results. A number of residential, infrastructural, social and commercial developments produced noticeable impacts in the Downtown area:
As part of the redevelopment process, public transport projects played a key role in the ‘opening up’ of the location. In particular, the building of the Metrorail Overtown Station, which formed part of the Metrorail elevated rail system. The super modern rail system stretches across the metropolitan area stopping in major employment centres such as Dadeland, Brickell, the CBD and the Jackson Memorial Medical Centre.
The presence of the homeless, either roaming the streets, or lined-up at soup kitchens throughout the community, had long been perceived as a deterrent to further development in the area. In an effort spearheaded by a 27-member Board representing the business, civic, religious, homeless provider and homeless communities, the Dade County Homeless Trust was formed to help alleviate the homeless problem by developing and implementing policies and funding recommendations premised on a "continuum of care" system of housing and services, which contemplates the expansion of emergency (temporary care) housing, transitional housing and permanent housing. Services provided ensured the stabilisation and preparation for self-sufficiency of homeless individuals and families. Funding for the 350-bed facility, which also houses the Dade County Public Schools Skills Centre, a clinic, a child care centre and offices of Legal Services, the Department of Labour, the Social Security Administration and the Department of Children and Families, is derived from a 1% food and beverage tax and is administered by the Dade County Homeless Trust.
Within the Omni District, the CRA has focused on providing mechanisms to stimulate residential and commercial development activity by private sector participants who are poised to invest in the area. The overall development strategy in the Omini area has triggered redevelopment as an urban entertainment centre (UEC), which will include opportunities for small businesses and spur significant residential investment in the area. In addition to the Community Redevelopment Agency's pledge of $1.4 million in tax increment revenues (TIF) annually to support Revenue Bonds will now help develop the Performing Arts Centre . The CRA is investing approximately $1.2 million in TIF revenues each year to leverage private investment and stimulate redevelopment in the area.
Performing Arts Centre of Greater Miami
Over the last ten years, Dade County's cultural community has grown more rapidly than that of any other major metropolitan area in the United States. Given this rapid growth in numbers, diversity and quality of cultural organisation, Dade's cultural infrastructure needs are being addressed. In July of 1993, Dade County approved a comprehensive plan to build a major new performing arts centre. This $151 million capital project includes a 2,200 seat concert hall, a 2,480 seat ballet/opera house, a 150-200 seat studio ('black box") theatre, and educational and ancillary support spaces. Additionally, an improvement to eleven existing facilities throughout Dade’s neighbourhoods in the total amount of $8 million was also approved.
A central goal of the Performing Arts Centre project is to serve as a catalyst to unite the Omni area's existing retail, education, communications, tourism and transportation assets into the critical mass necessary for a thriving and distinctive urban destination. In order to accomplish this, the Centre’s development will involve a significant urban master planning component to maximise its positive impact on the surrounding neighbourhoods and capitalise on the opportunities for co-ordinated development with other major public and private sector projects being planned
Development Projects with Community Groups
The Southeast Overtown portion of the District, where several large tracts of land were acquired and cleared in the latter portion of the 1980s, remained largely undeveloped, with the exception of the Poinciana Village and a 35-townhouse project spearheaded by St. John CDC. That trend was reversed with the construction on two city blocks adjacent to the Miami Arena, as part of a joint effort by public, private and private not-for-profit agencies to bring about 363 home-ownership housing units in the area.
The two city blocks surround NW 9th Street and are flanked by First and Second Avenues, the site of the Ninth Street Pedestrian Mall extension recently completed through a joint City of Miami and Metropolitan Dade County effort. The project, which consists of 52 2-bedroom/1.5 bath and 44 3-bedroom/2.5 bath homes, is designed to be an intrinsic part of the Overtown Historic Folk-life Village and fully incorporates the Kente pattern and other African heritage design elements of the Ninth Street Mall into its design, transforming the area into a pedestrian-friendly environment around which the community is built.
Similarly, BAME Community Development Corporation, a CBDO affiliated with Greater Bethel AME Church, has seen its New Hope Residential Project brought to construction. The project provides 40 single-family detached houses consisting of 30 three bedroom and 10 four bedroom homes.
Community Participation Mechanisms and Impact Goals
The Overtown area of the redevelopment programme demanded meaningful ethnic minority residential participation in the implementation process. The Overtown Advisory Board insisted that the redevelopment agency develop a mechanism to insure that the residential and business sectors of the community would be favourably impacted with job and investment opportunity.
The CRA sponsored a resolution that was passed by the City of Miami to ensure minority utilisation on capital construction projects. The Agency followed the goals established by the US Department of Housing & Urban Development. Under the US Dept’s Notice of requirement for affirmative Action to Ensure Equal Employment Opportunity, a goal of 20-40% minority utilisation for all trades is required for all solicitations for offers and bids on construction contracts or sub-contracts. The CRA included the following goals in their bid document for submitters to follow
50% equity investment goal in project development;
50% black construction goal in redevelopment agency sponsored activities;
25% black contracting goal in the overall redevelopment in the area;
50% black construction hiring goal;
60% black retail space ownership.
There are similar goals set up for the utilisation of black businesses, black business development, equity participation, and community participation. The control of this action was dictated by the bid documents that were advertised by the CRA. Specific details were included in each bid request outlining exactly the type of participation that was expected with the submission. Submissions that were closest to the stated goals were given higher points in their scoring and was reflected in the selection of the winning bid. This was determined by a selection committee ratified by the City of Miami Commission that included professionals in the development field, staff of the Agency, and representatives from the community. The bid documents supported the City of Miami’s first source hiring policies relative to redevelopment districts when the project had any involvement with local government assistance, financial or otherwise.
Major Obstacles Addressed.
Despite the ultimate progress made, local investors, banks, and developers were not as enthusiastic as the local media and general public. During the first ten years no local developers brought investors to the project area and only one local bank participated in part of a development project. Out-of-town developers and investors did all of the development which took place during the first fifteen years with the entire permanent financing coming from the public sector, with the exception of Poinciana Village (a condominium).
In the initial stages of implementation some of the more serious flaws in the redevelopment programme that seriously impacted negatively on the implementation process were:
▪ the lack of pipe-line development projects at the time of implementation within the district where tax increment revenues could be captured to jump-start the financing;
▪ the decline of the tax base by over one million dollars during the first year after the base was established;
▪ the majority of the land in the designated redevelopment area was in private ownership;
▪ condemnation in the state of Florida is extremely difficult and costly. The public (local government) has to pay the cost of private attorneys hired by the property owners regardless of the outcome in addition to the cost of relocating residents and businesses. This resulted in extremely high costs associated with the relocation of existing uses which had to be borne by the public sector;
▪ the CRA had to function within the local government system which moved excessively slowly in relation to private transactions. This led to frustration on the part of private developers and investors and significantly increased the site assembly costs of the programme;
▪ as a result of political decisions, the redevelopment area was much too large (240 acres originally which increased to 500 acres in 1987 when the Omni district was created), and too little money in addition to poor market response failed to achieve a substantial critical mass of development;
▪ the decision to locate initial public investment based on political consideration rather than on an economic agenda created difficulties in establishing an economically solvent tax increment district from which to pump-prime further developments;
▪ the cumulative effects of many of the issues raised above meant that it was five years before enough value could be created to issue revenue bonds. This resulted in the local government having to incur an unusually high cost in order to jump-start new developments.
Several of the challenges faced by the CRA were due to the lack of a pro-active initiative on the part of the local elected officials who formed its Board. This demonstrated how difficult it is for local elected officials to lead the redevelopment process on their own.
Bibliography and Credits.
Herb Bailey, ex-Executive Director Community Redevelopment Agency, Miami.
Greater London Enterprise, Managing the Impact (of Urban Regeneration), 2000
Dr John Cordrey, The Beacon Council.
The Beacon Council, Various materials and Background Information.
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