Governing: Immigrants Establishing Roots in Gateway Cities

An interesting article was released recently in Governing Magazine discussing the role of the foreign born in declining cities. The basic finding is that in some cities a declining or stagnated native-born population is being offset by growth in  foreign-born residents (this is true overall in the state of Massachusetts, for example – net international inmigration outweighs net domestic outmigration). Some cities are making an explicit pitch to international migrants, although it’s unclear how well that’s working.

Population growth isn’t always an important end goal for cities in and of itself, but it’s definitely true that cities that can stabilize population loss and diversify have an additional leg to stand on. This is especially important for the Rust Belt and northern cities that have been continuously hit by deindustrialization.

Louisville and Indianapolis are two examples of cities attracting new international residents to places where they have not traditionally been. As the article states, they’re starting from a very low level, making the percentage gains huge:

Louisville FB and NB

Indy FB and NB

Compare with Boston, which has always had a high percentage of foreign-born residents. It shows 3% and 2% growth in foreign and native-born residents respectively, even though the overall numbers are far higher than either Indy or Louisville:

Boston FB and NB

I poked around in other cities I am familiar with to compare. Most are in line with my expectations – high demand areas like Seattle, San Francisco and Portland are seeing both segments of the population grow, often with the foreign born growing faster. Salem, OR made me double take. The foreign-born population has declined (or possibly remained stagnant given the margin of error) while the native-born has increased. It was one of the only cities I was able to find with this pattern.

Salem FB and NB

I am not familiar enough with Salem to say what caused this decline. It could be that a previous immigration boom to Salem has now ended, or maybe people who originally immigrated there don’t love Salem and tend to then move elsewhere like Portland or California.

Another interesting example is some of the Gateway Cities in Massachusetts we’ve looked at. Although they haven’t experienced the same population declines as an Akron or Cleveland (Cleveland, by the way, along with Flint and Detroit, declined from 2009-2014 in both populations), I suspected that I would find that their continued growth has depended on an influx of the foreign born. That’s definitely true in Springfield:

Springfield FB and NB

I was surprised by the growth in Worcester. I knew that the demographics in the city have changed quickly, but I didn’t expect it to be this stark over the 5 year period:

Worcester FB and NB

An interesting counterpoint is Lowell, where both foreign- and native-born populations are growing.

Lowell FB and NB

I wonder if Lowell’s population growth in both sections is a cause or an effect of their relatively successful economic positioning?

An interesting caveat about the data, which you should play around with: populations are based on those living within the city proper. Normally, a metro area is a better way to look at migration data, because individual city borders tend to be arbitrary. In this case I actually think it’s helpful, because it can capture loss of population whether that population moves to suburbs in the same metro or to another state altogether. When it comes to things like tax rolls, school enrollment, and other bread and butter local government services, the important question is whether someone is here or not, not where they ended up.

Stadiums, Subsidies, and other Wishful Thinking (Part 1)

Boston’s shot at the 2024 Olympics is dead and buried, but the post-mortem analysis will go on for many years. Why did the bid fail? Is it because Boston is the city of “no”? Was a sustained effort of “people power“?

Buried beneath the mutual recrimination is an important question: have voters started becoming more skeptical of the megaproject?

The way Boston 2024 was sold in Massachusetts was an exercise in the “wishful thinking” mode of economic development. The Olympics will finally let us fix our public transit, they said. That disastrous traffic circle will disappear. The more boisterous defenders insisted that this was the opportunity to prove that Boston is a real, world class city – and now that we’ve lost to LA, we just have to watch from the sidelines as the big boys eat our lunch.

I wasn’t dead set against the Boston Olympics, but seeing it sold in this way made me very skeptical of its actual impact. It seems to me that a shrinking proportion of voters and policymakers believe it’s smart to rely on the next big project as the thing that’s going to save us. I think it is possible to say that the death of Boston 2024 is part of a trend that is bigger than the Olympics and bigger than local politics.

If I’m right about this – and given the amount of wishful thinking economic development still going on, I’m not sure I am – this would be a huge change for the better. The megaproject as silver bullet to economic woes is still rife in this country.

In a broader sense, wishful thinking economic development preys upon all our human biases for simple answers to complex problems. It’s apparent in the convention center building craze, the public financing of stadiums and sports venues, and the massive incentivization of firms with public dollars. It replicates the same playbook everywhere: shaky public benefits, underestimated costs, and the public left holding the bag on big, flashy purchases. The fight for more transparency, less corruption, and more democratic decision-making is and should be a recurring theme in economic development across the world.

This matters not just for the economy, but also for public participation in democracy.  It’s why many people see economic development – in a line that I wish so badly I had written – as “the stuff of business parks, tax perks, and a long aisle of pig-lipstick.”

In this two part series, I’m going to go through some of the more routine outrages that go on in every state and city in the country.

I hope that we can look back fifty years from now on these stories like some kind of Tammany Hall period – outrageously corrupt, but definitively in the past. Step one, in my mind, is disassociating these ridiculous schemes from legitimate economic and community development.

Exhibit A: Sports Venues

I hope this isn’t news to you: the amount of public money that goes to sports teams in the US is simply shameful.

If you’re a fan of pro sports, you probably have heard about why the public needs to help the team build a new stadium. The logic is seductive, if you’re easily seduced by stupid things:

  • To be seen as a “real city” we need a world class team.
  • The younguns love sports. Without sports, they will leave and we’ll be a brain-drained backwater / We need to have sports to attract the creative class.
  • People will come to the new stadium and spend lots of money. Spillover effects!
  • A team gives something our city to rally around. A stadium is a symbol of civic pride.
  • If we don’t buy a new stadium, they’ll move to LA/Las Vegas/Seattle/London/Abu Dhabi

Spend a few minutes catching up on your local boondoggle through Field of Schemes, a site dedicated to exposing the ridiculous narratives behind public stadium subsidies.

The fact that public spending on stadiums is a real lemon is not controversial. Whenever economists want to add a mainstream press citation to their resume, they come out with another study proving what a shakedown public financing of stadiums is. Deadspin estimated that the cost of direct subsidies to 2012 is $32 billion out of local coffers, which is very conservative in many ways (for example, not counting the cost of foregone property tax, which the arenas rarely pay, or increased municipal services, like the cops paid overtime to direct traffic). The more you dig, I guarantee the angrier you’ll get.

  • 65 of these stadiums, about a third, have already lost their professional teams and/or been demolished. These ghost stadiums cost $8.8 billion, of which$6.6 billion (75 percent) was paid for by the public. Many of these included horrible outer-city 1960s and ’70s megastadiums that were largely funded with taxpayer dollars, only to be shuttered in the ’90s and early ’00s.

If you want a stem to stern examination of how bad these deals are for their cities, I’ll recommend a killer piece by Next City on the development of a new Detroit Red Wings stadium with $284.5 million in public financing. Detroit! It would be hilarious if it weren’t so heartbreaking. Certain details of the deal, such as redirecting property taxes that would otherwise go to funding Detroit schools and selling the property to developers at well below market rate – in fact, for $1 – might make Ebenezer Scrooge blush, given Detroit’s recent bankruptcy.

All in all, the Red Wings case is thoroughly modern: sold as a public service and a boon necessary for a struggling city; financed out of complex, redirected money rather than a giant novelty check cut from public coffers; done for private gain and in the name of public impact; and thoroughly invisible to a public that loves their team but has trouble sorting out the details. It’s looting carried out in broad daylight.

Local media play a huge role in explaining these issues to the public, who rarely have time to sort out where the money comes from and how this financing scheme affects them. This is exactly the sort of coverage hurt by the decline in local press outlets.

Unfortunately, while the deals are local, the system is national. Team owners have much more leverage over cities than the days when no public financing went to stadiums. There’s just more cities that want a team than there are teams. The leverage to fleece taxpayers only declines if a huge number of cities suddenly refuse to play ball.

If you want to see this problem at its logical endpoint: I wrote recently about the local scramble to shell out 9 figures for the minor league Red Sox affiliate, the PawSox (formerly/currently of Pawtucket, RI). Thankfully, most local decision makers seem at least somewhat skeptical of the PawSox pitch – but never underestimate people’s ability to sell themselves the Brooklyn Bridge.

The next time a new stadium comes up in your area, especially if you’re a sports fan, you owe it to your community to ask who pays, how, and why. Be honest.

Exhibit B: The Edifice Complex

Stadiums are unfortunately just a part of a broader suite of poor decision making and inflated claims. The “Edifice Complex” refers the desire to build grand buildings at public expense for either personal aggrandizement, or more to the point in this context, the one key needed to move the economy forward.

Let’s look at one fascinating example of this trend in action: convention centers. There may even be a convention center nearby you that is screaming for public investment. This totally ignores the changing market for conventions and the weak claims that they make.

In 2012, CityLab wrote an article examining the convention center building boom:

Over the last 20 years, convention space in the United States has increased by 50 percent; since 2005, 44 new convention spaces have been planned or constructed in this country alone. That boom hasn’t come cheap. In the last ten years, spending on convention centers has doubled to $2.4 billion annually, much of it from public coffers.

…But there’s a problem with this building bonanza, and it’s a doozy: There aren’t really enough conventions to go around. The actual number of conventions hosted in the U.S. has fallen over the last decade. Attendance at the 200 largest conventions peaked at about 5 million in the mid-1990s and has fallen steadily since then.

Like stadiums, you will hear the same tired talking points trotted out for *every* publicly funded convention center, regardless of context. The vague idea that they create “cachet” for the host community – unfalsifiable, like any good slippery claim – is ubiquitous, for example.

Convention centers are only one type of white elephant in the Edifice Complex. Other possibilities include casinos, luxury hotels, or ridiculous highway expansions. The common theme is that costs will be underestimated, benefits overestimated, and common human biases like the sunk cost fallacy or appeals to regional pride will be exploited.

Often the Silver Bullet is a cash handout dressed up like an infrastructure project. I don’t really need to pile on Detroit any more (they already have a basket full of image problems and its issues aren’t out of line with what happens in other cities) but Governing recently reported on a story that shows how far the madness can go, and the city happens to be Detroit. Detroit’s port for cruise ships cost taxpayers $22 million and has achieved considerably less than that in economic output. In fact, it has received just one cruise ship in 2015, and when that ship returned the passengers were not allowed to disembark because Customs said the facilities were not able to process cruise vessels or passengers.

Detroit only serves to prove the simple fact that being out of money is not a limit to these type of schemes; it is sometimes, in fact, a prerequisite. To quote the Governing article:

Elective politics rarely attracts small egos, so it’s only natural for officials to want to do big things. But good government is rarely sexy. Sometimes it requires resisting the siren song of projects that rely on patently unrealistic economic assumptions. That’s particularly true when those who can least afford it — such as the taxpayers of a suffering region — are picking up the tab.

These dynamics aren’t unique to Detroit: here’s some similar stories from Miami, Seattle, and DC. I’ll have more on how desperation creates ideal conditions for looting of public coffers next time.

There’s another element that I have to leave out of the Edifice Complex for this series: the ridiculous way we overbuild highways in this country. If you’re interested in the topic you’ve got to check out the excellent Aaron Renn on the Illiana Expressway and I-64 in Louisville. They suffer from the same optimistic projections, blindness to reality, and dependence on government support. In ten years, when traffic is just as standstill or tolls aren’t getting their projected return but the local area has been entirely covered by overpasses, the folks in charge are already on to the next project, with no time to talk about yesterday’s news.

How Did We Get Here?

Almost everything I’ve talked about in this post is a direct result of manipulation about what the term “economic benefits” means. The typical project is justified on the basis of nebulous “economic effects” which have little to do with how good an investment a project is. For example, even if Detroit could prove it had directly caused $44 million in private spending on cruise ships through the purchase of a new port, this does not mean that the port was necessarily a good investment. They have not doubled their initial investment of $22 million, although it’s often framed that way. Two questions at the very least have to be asked and measured to determine the quality of the investment: how much actual tax revenue did the project generate, and would the spending have happened without the subsidy?  This should ideally take the form of rigorous accounting, but even basic addition is lacking from most public projects. Benefit calculation usually takes the form of a wink and a promise from the developers themselves.

It’s depressing, but these facts are something people have to understand. The 21st century demands scientific and computer literacy. I propose that people need to become more economically literate as well. More outrage to come in part two.

The Market Basket Case

If you don’t live in New England, you undoubtedly missed out on the story of the summer for regional news outlets: the Market Basket saga of 2014. Whether “Greek tragedy” or “war of attrition” is overblown to describe the corporate troubles of a regional supermarket chain depends on your perspective. It’s a great story to make fun of, but it also offers some takeaways that people in other regions might find interesting but would have no reason to know about.

Market Basket is a cheap regional grocery store with some fanatic devotees. For many years the chain has been owned by the Demoulas family, which has struggled behind (and in front of) the scenes to wrestle control of the store from one another. The antagonists in this particular saga are cousins Arthur T. Demoulas and Arthur S. Demoulas, AKA Artie T. and Artie S (for full comic and dramatic effect one should read this in a Boston accent, IE, AH-tee).

Artie T. was pushed out by his cousin in June from his role as CEO of the stores. During his time as CEO, Artie T. had built up a substantial following for his penchant for personal relationships with employees (remembering names, attending birthdays or funerals) and more generous benefits, wages, and opportunities for advancement than other supermarkets.

The Arthurs. Can you guess which one is cast in the role of folk hero, and which is conniving corporate exec? Source: http://itsgoodtoliveinatwodailytown.com
The Arthurs. Can you guess which one is the folk hero, and which is conniving corporate exec?
Source: http://itsgoodtoliveinatwodailytown.com

Soon after the news of Artie T.’s firing broke, truck suppliers struck, Market Basket workers took up protests outside their workplaces, and supporters of all stripes enforced a customer boycott of Market Basket stores. The media picked up on the story enthusiastically during a slow news summer and a lackluster Governor’s campaign, playing out each testy meeting of the Demoulas family and reporting the newest reports of lost earnings like juicy celebrity gossip. After about 6 weeks of protests, the Arties agreed on a sale allowing T. to come back as CEO, buying the company from the rival faction.

Source: Portland Press-Herald
Source: Portland Press-Herald

Unless you just love the bizarre drama of the story (I can pretend to be above it, but there’s some pretty good lore – like apparent fistfights, switched allegiances, and surveillance wires) it has a couple interesting takeaways.

The first is the role of personality and likeability in corporate governance. There have been debates about how much one can generalize from the outcome of the MB saga, but one thing is for sure: there was a fanatic devotion to Artie T.’s controlling role. In an age where most people working for large companies have no idea who works two steps above them, a vast majority of employees had enough familiarity with their corporate executive to put their jobs on the line for him. The demise of the protests were predicted many times over the course of the strike, but the protesters got essentially everything they wanted – Artie T’s reinstatement. Beyond their belief in the leadership style of their old boss, they have no reason to expect personal gain.

It’s surely not a straightforward morality tale, but it’s hard not to side with the workers, especially when some columnists so helpfully fulfill the role of Ebenezer Scrooge by insisting that the protesters “go back to work” and that companies do not “have to dance to mob rule”.  To me, it’s a small sign that workers are not entirely powerless to improve their work environment, even if it was ultimately a symbolic issue.

Second, the entire affair was orchestrated by non-unionized labor. In a world of dwindling union membership and resources, the protests could be seen as a hopeful note for labor or a depressing death blow, depending on your perspective. This Globe article even raises the possibility that the very non-unionized nature of the workforce may have created greater possibility for success: managers and low-level workers could all work together to achieve their goals. In unionized workforces, managers and workers are usually prohibited from taking labor action together. The downside is that unions can help workers hang together during a strike, for example by helping pay a fraction of their paychecks.

If anyone – for or against unions – is predicting that this heralds a new age for labor, I don’t think they’ve thought this one through clearly. Certainly if Market Basket had been a national chain in the McDonald’s or Walmart model rather than a family owned company, the protesters would be begging to go back to work now – the deep pockets and diffuse governance structures of multinational corporations would probably make a protest untenable on the national level.

If you choose to see a morality play at work you can. I think there are more interesting questions to answer. Is the changing structure of the economy closing down the possibility of another Market Basket? How and why did employees (and shoppers) attach to the good Artie vs. evil Artie narrative so easily? Could other CEOs or workers’ rights advocates use this to their advantage, or is Market Basket is a unique case in a unique area? Whether this could even happen in a place with a less than religious zeal for its grocery chains is an open question. You’d better believe, though, that the saga of Arties T and S will be the talk of New England business school seminars in the years to come.

Introduction: Visiting the Gateway Cities

What comes to mind when you think about New England? I have to admit that before moving here, my view was almost cartoonish. I expected Massachusetts would be about evenly divided between the high-tech, prosperous Boston metro and idyllic colonial towns and pastureland. As it turns out, that view is very wrong. Although Massachusetts has education rates and income levels that other states drool over, success on some measures obscures the fact that there are huge gaps within and between cities in the Commonwealth.

In Massachusetts ,”Gateway Cities” are some of the places that don’t fit within that binary. Gateway Cities are a legal classification of city developed in the last decade to focus attention on neglected parts of the state. Part policy response and part branding push, the Gateway Cities cover 11 midsized post-industrial Massachusetts cities outside of the Boston metro area (although the number has since expanded to 26, including some high poverty areas right outside Boston).

Gateway Cites

The 11 original Gateway Cities. For some background on “Gateway Cities,” you can read the MassINC/Brookings Institution paper that created the concept.
Source: MassINC

Massachusetts’ prosperous reputation does have some basis in fact. The state generally and Boston in particular post some impressive numbers in almost every metric of economic growth. But the fruits of this prosperity are spread very unevenly. In terms of jobs, personal income, and economic diversity, Gateway Cities have been lagging for decades: in aggregate, the number of private jobs in these cities is the same as it was in 1960. Industrial legacies have acted like a millstone around the neck of growth and economic diversification. Unsurprisingly, they are also the areas that have the largest reputational problems to overcome. At the same time, Gateway Cities contain some of Massachusetts’ richest historical, cultural, and even economic assets, and were each at some time in their history places alive with people, ideas, and trade.

As a series on the blog, I plan to visit the 11 original Gateway Cities in Massachusetts and write about what I see in each. My goal is to provide just a bit of context on each economy, community, and region. I’ll be trying to answer some basic observational questions (What does this city say they want? Are they following through on it? Is it working?) from a skeptical but contextualized viewpoint.

I want to do this for two reasons. First, the current coverage is bad. If you follow the major urbanism or placemaking websites, you know when Boston, San Francisco, or DC wins a major victory or starts an interesting new experiment but no one really knows what’s happening in the struggling communities down the road. The media gap is especially pronounced in these small cities, which usually have a single, nationally-owned news outlet hanging on by the fingertips. The drive to come up with a positive strategy becomes doubly important because without constant forward progress, these places cannot sustain the press’s attention. If reputation matters to economic success, it spells trouble for these places. In the age of the internet, there are no information vacuums – only empty repositories yet to be filled with negativity.

Second, the problems in Gateway Cities get at a timely and fascinating question in economic development: “What economic strategy will help small- to mid-sized cities, especially those with a strong industrial heritage, move forward?” Do they focus on tech? Cultivate a class identity? Plan to shrink? Though big cities are popularly seen as being in resurgence, no one thinks that the way forward is clear for smaller rust-belt cities. Don’t get me wrong, bigger metropolitan areas have huge challenges – they struggle with inequality, gentrification, and suburban retrofitting in ways that smaller cities don’t – but big metros have at last started to get some of the attention they deserve.

By contrast, small-to-mids like the Gateways face a wide array of challenges. They don’t have the same heft to force state and national governments to pay attention. Their problems are controlled by such local circumstances – sometimes as local as a single company – that orthodox economic development strategies aren’t helpful. There’s no Mayor Bloomberg to command headlines or Ed Glaeser to relentlessly champion small cities as a class. Well-meaning leaders in small cities sometimes just try to copy what’s going well in the big cities, rather than try something bold and original that could move the region forward but poses a high risk of failure.

Although I think most Gateways get an unjustified bad wrap, I don’t mean to suggest that what I write will be relentlessly positive. Exposure and growth can come from acknowledging an area’s shortcomings. I hope by personally visiting them I can get across a better understanding of the gap between their rich history and the present, and try to find a little bit of what’s work is left on their path to success.