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Creative Construction: The New Phase of American Municipal Finance

By Theodore Brown

Seventy-five years ago, Walker Evans and James Agee published their book Let Us Now Praise Famous Men, giving the Depression a composite face: rugged and, while not defeated, profoundly resigned. A portrait of the The Fields, one of the three families that Evans photographed, shows Bud, the father, shirtless and malnourished, staring patiently ahead while his wife Lily Rogers, exhausted bordering on conquered, nurses their son on a iron wrought bed. Ironically perhaps, these photographs of individual hardship were funded by the federal government. Today, if Walker Evans were working, his subjects might be the government itself.

At a local level, municipal governments have been pushed to brink — and in places such as Harrisburg, Philadelphia. or Central Falls, Rhode Island, they've gone past it and into bankruptcy. Due to the Great Recession and the collapse of the housing industry, cities across the country face lower tax revenue per capita than before and limited political ability to raise taxes in tough times. As a result, cities like Colorado Springs are reducing the services they pay for. At the same time, most cities are stuck with growing public employee entitlements that were negotiated during better times. Detroit, for example, spends 50 percent of the city's annual budget on pensions and other entitlements. While Federal funding, particularly ARRA and TARP dollars, has helped many suffering cities with infrastructure projects, those grants are now long gone. Certainly it's not going towards any photography series.

But if necessity is the mother of invention, cities have had to innovate to survive. And many have shown their resourcefulness by finding ways of increasing their revenue and reducing their costs. Atlanta cut through significant pension issues in 2011 through hard fought compromise, and officials and workers are still recovering from the bruising process. Chicago's decision to lease the Chicago Skyway a private company produced a windfall for city coffers but opinions on the move are mixed. Other cities have avoided paying for city employees by "outsourcing" public services to private providers such as community development corporations, business or neighborhood improvement districts (BIDs or NIDs) and others. In places like Cleveland and Detroit, well-run programs such as University Circle, Inc. and Midtown Detroit, Inc. aren't just working with the city or picking up the slack — they might be radically changing the direction of the city. In Cleveland, the city's center has shifted to the University area, which begs the question of what happens to those who aren't affiliated with a university or aren't living there? Midtown Detroit's Sue Mosey may have been called the "Mayor of Midtown," but may actually have more access to capital and more capacity to get things done than Detroit's Mayor Bing.

The shift isn't uniformly positive. While community development corporations (CDCs) in their various incarnations are providing services at the grassroots level, their impacts are limited to the communities they operate in. City Governments purview ends not at blocks but at city limits—they can cast a broader net through simple administrative breadth. But ebbing capital leads to waning influence over everyday events that CDCs cannot, for legal, administrative, or economic reasons, pick up the slack on. The best CDCs are the ones that find the middle ground, that find that the best way to help their city is to pick up where official efforts have left off.

Cleveland is shrinking. In the last half century, the overall population has gone from 914,000 to 396,000—consider a city the size of Tucson, Arizona being shaved off of Cleveland's census reading and you might get a better idea of the impact. Contracting populations have an odd effect on administrative checkbooks: one the one hand administrators are providing mitigated services since there are simply fewer people to look after, but on the other hand cities are still paying for facilities built for peak population periods. For cities like Cleveland, their diminutive tax receipts simply aren't flush enough to cover costs. Office of Community Development head Daryl Rush told me, "Predatory lenders were especially good at  reaching out to people who held equity in their homes. We had lenders out there attempting to supply loans below market rate and people ended up just not knowing what door to knock on to get their home repaired." Rush also lamented the lack of Federal funding for Housing and Urban Development (HUD) grants in Cleveland, influxes that have dropped by as much as half for certain sections of the housing stock, "We're seeing severe funding reductions across the board," and community development corporations (CDCs) - not-for-profit organizations which provide services on a community level - are picking up some of the significant slack.

They're also casting a wider net and are attempting to reinvent their roles within city limits—simultaneously.  "I'd say we pick up with services where [city government] leaves off," says Chris Ronayne, president of University Circle, Inc. a CDC that has been operating in Cleveland for six decades, "value added community policing, maintenance, marketing, and education programs, programs like that."  Cleveland has 21 CDCs alone offering everything from classes on GED preparation and basic financial literacy skills to housing development and upkeep. Learning polynomial algebra or how to apply for a home loan and actually understand exactly what you are signing aren't marginal gains for most in the communities that make up metro Cleveland. In the words of Mr. Ronayne: "We do everything in our capability to enhance the public realm. We're trying to add value back to the community."

UCI isn't alone in their efforts, Cleveland's extensive CDC network means that community improvement efforts often spill across boundary lines to improve not only their communities but the city at large. "CDCs are in the best position to deliver programs because we know who our people are," Vickie Easton Johnson wrote in an email to me in January. Johnson is the Executive Director of Fairfax Renaissance Development Corporation, housed in a small grey building southwest of downtown Cleveland. Daryl Rush echoed these sentiments from the government side, "A critical thing for the CDCs is communication on the ground. The assumption is that they can do a better job engaging and informing residents since they're right there." The City of Cleveland and their CDC counterparts are tailoring their programs to better serve one another, and this allows CDCs to grow their service structure during lean times. "We need to play a more active in work force development and economic development," Ms. Johnson reiterated. The reemergence of a kind of neighborhood and urban identity—though to many the resurfacing is simply a recognizance by those with deeper pockets— found a chronological soul-mate in CDCs where the financial and time investments are as internal as the outputs.

Johnson's CDC is—like Chris Ronayne's UCI—seeing more and more adults who are looking to learn skills that were not in demand 20 years ago—mainly basic computer dexterity—and young people who are entering a frayed workforce and may, for different reasons, not be able to continue their learning at a college of any brand. "We're working with the Cleveland Clinic to design programs specifically for residents to the Clinic online," says Johnson, "these are entry-level positions, but once residents have been employed career ladders will be developed to assist them in being promoted in the health care systems."  These twin CDCs in Cleveland are attempting to equip residents with more than remedial tools, they are attempting to propel them through entire systems.

That isn't a novel concept in the history of community organizing, which in this case is beneficial; vulnerable people don't need experimentation in times like these, they need stability. The calculus is linear and reciprocal; CDCs assist the communities through urban fortification and a certain degree of accomplishing inertia emerges. However, given the current circumstances that cities like Cleveland find themselves in, there's a significant snowballing of responsibilities. "We've reshaped our organization to respond to wider neighborhoods service needs," says Chris Ronayne, "We've found ourselves more in the role of an unofficial agent of the city and are able to deliver service to our neighborhoods." The delivery of services might even be the future for CDCs in Cleveland. "the CDC of the future will need to rely more on a market drive fee for service model rather than the traditional model of philanthropy." Vickie Johnson puts it another way, "CDCs want to play this role but there isn't funding to develop staff capacity," however the potentiality of a market driven solution to the problem of understaffing could be a portent of big things.

Both FRDC and UCI has also partnered with other business entities in the community. "We recently teamed up with PNC Bank to offer credit counseling and wealth building classes for our clients," Johnson said, "and last year we teamed up with a local developer who was restoring an old building and turning it into a hotel—19 Fairfax residents were hired and three of them are in supervisory positions now." These are small victories from a national perspective, but for Cleveland's disenfranchised populations there is no added morality in volume. "The future of Cleveland depends on all these organizations working together to preserve and advance the identities of each neighborhood while moving the city forward as a whole," Laura Kushnick, Director of Development and Community Relations at the Downtown Cleveland Alliance, a non-profit dedicated to the development and betterment of the downtown area. In a basic sense, then, the privatization of piecemeal public services has actually found its way into the vernacular of urban amelioration. "Collaboration is key," Ms. Kushnick adds as the combined work of CDCs and non-profits like DCA "will help create an environment where civic participation is at an all-time high."  However the prismatic yield of a single input —time, in this case—typically illuminates all corners of the district that choose to take part, and in Cleveland that seems to be the norm.

Institutions like UCI, FRDC, and DCA are not in Cleveland because it's easy to pull a city out of the depth of a recession, and their hard work isn't a panacea for all of what ails their city. Indeed, Cleveland has seen continuing costs on behalf of a still drowsy recovery. According to the Brookings Institution's Metro Monitor which tracks general economic indicators in America's 100 largest metro areas, Cleveland ranks towards the middle when you combine all metrics and lower than average in housing prices and gross metropolitan product. These results reinforce the need for expanded public service and with Cleveland's necessarily painful budget cuts the only outlet for community improvement lay at the doorstep of the city's CDCs.

Employment numbers in Cleveland have been dragging it back towards the mean, though, and its 8.3% official unemployment ranks almost a full point below the national average of 9.1% in the first quarter of 2011. There is a circulating theory that much of the job loss sustained in the past three years has been distinctly institutional, that is to say that the jobs lost are ones that don't intend to return—permanent job separation, the bureaucratic term for "fired", claimed a whopping 53% share of the "reason-for-unemployment data" according to a study conducted by Wayne Froman at the Urban Institute, the highest percentage in 43 years. It seems that industry is able to maintain balance sheets that bear at least a passing verisimilitude to the peak years without adding more workers to the books. The notion implies merit: why else would corporations be turning record profits while unemployment numbers stall out? Cleveland, through avenues like the titanic efforts of community development organizations with very un-titanic budgets, has challenged the philosophy. "All that's needed is open minded and willing public leadership that's less focused on the parochial and laser-focused on performance," says Chris Ronayne at University Circle, Inc, and indeed that is what CDCs throughout Cleveland are attempting to foster within their spheres of influence. The crawl back from what was originally a 7.2% plunge from peak unemployment hasn't exactly been alchemy and even civic leaders like Vickie Eaton Johnson haven't been able to bring the industrial oomph back to Cleveland—but progress is progress, movement is movement.

If there's a city that is more exemplary of American hard times in the modern era than Detroit, I haven't heard of it. The twin haymakers of industrial exodus and the auto industry swoon have left their mark on the Motor City—but the scars aren't indelible. Detroit, like Cleveland and any number of cities that were hit hard by the recession, is taking a necessary hatchet to their budget, rethinking priorities, and making tough choices when it comes to services. Just like Cleveland, though, Detroiters are organizing around community institutions, a sort of privatized grassroots.

Community efforts in Detroit can be bifurcated along geographic borders: in the Downtown and Midtown area, which includes the quintessentially Detroit Woodward Corridor, you have Sue Mosey, President of Midtown Detroit and the doyenne of Detroit community advocacy. Flanking the central business district are an amalgam of organizations working to make the outskirts of Detroit a better place and attempting to sew the same seeds that have seen generous growth downtown in recent years. No growth is without pain, though.

"Most of the community development corporations (CDCs) in the city see that the city simple doesn't have the staffing in the planning department to provide project management for the different neighborhoods," Sue Mosey told me in February, "As effective as we can be we need a strong partner in the planning department." The echoes of Cleveland's administrative truncation are obvious; with budgets being cut for social and sometimes essential services in Detroit there is less opportunity for, in Mosey's words, "the consistency of a single [governmental] person who gets to know your neighborhood really well." CDCs still need a reciprocal teammate to get meaningful work done though, and Mosey has become an expert at leveraging dollars and manpower to make the collaboration between non-profit and government substantial.

"We have a residential incentive program with $10 million in capital to encourage residents to move in [to downtown Detroit]," Mosey told me, "and we have two major hospital complexes [Henry Ford medical and Vanguard Health Systems] investing $500 million each in their medical center properties." Detroit is not playing with small chips. Sue Mosey is optimistic not only at the prospects of downtown and midtown, but is excited about the burgeoning success of the present, "This neighborhood has never done so well. Tons of small businesses are moving in; we have a groundswell of entrepreneurism here." The housing market, at least in this area of Detroit, is trending positive as well with 95% of the housing stock occupied in downtown and midtown thanks to the aforementioned incentives put in place by Mosey's organization. These aren't modest results in a city like Detroit where homes were famously being sold for $1 during the worst of the last decade and peak unemployment numbers within city limits reached an unbelievable 30%. Mosey's efforts are a big reason that downtown and midtown Detroit are coming back from those awesome troughs.

Not everywhere has the inherent benefits of being a downtown business district, though, and rehashing the individual efforts of Sue Mosey's Midtown Detroit isn't necessary to explain exactly how she began this process 25 years ago. Those lessons are seeing new applications in new regions of the metro area. "Everything we're seeing—what we see now in terms of growth in the center of the city—is because of [Sue Mosey's] organization," Helen Broughton, community manager of the quasi-governmental non-profit Next Detroit, told me over the phone, "the rest of us are just at that groundbreaking, we're hacking through the weeds. It's a different world and it's been hard." Broughton, like Mosey, understands that doing small things can result in big windfalls, "One of our main focuses has been Clean Neighborhoods and we're duplicating the litter picking program they have in downtown," Broughton explained, "Our opinion is that the physical quality of neighborhoods has fallen below property maintenance standards and we want to educate our neighbors on maintenance codes so they can teach their neighbors." Detroit citizens want "[their neighborhoods] to be clean, to be safe." These aren't extravagant desires for city dwellers, but they aren't easy ones either. Creating a healthy environment for a few blocks much less a city of a million people is not something that Broughton's Next Detrot can do alone.

"We have a very good relationship with the City of Detroit and they understand what kind of work we're doing," says Broughton. Even though there is respect and collaborative spirit emanating from either side of the government-privatization equation, the fiduciary restrictions placed on city administrators is still felt, "We can't expect the city to do everything, so we have to limit our asks but we know that we can go to any city officials. We just have to meet them halfway." Compromise is endemic to these urban policy solutions, neither CDCs nor city government can accomplish their tasks alone and the fact that partnership between the two sides is embraced creates a feeling of guarded optimism within both established and nascent community development institutions. Detroit may not be able to bring back the same brand of aluminum-clad capitalism to its region, but there is room here for reinvention through energized teamwork. "We're always looking for ways to increase efficiencies between neighborhoods. We're not completely separate entities," beamed Sue Mosey, but not without adding, "There still remain challenges."

Solutions are seeded with idealism, but do not carry the heavy weight of unlimited expectations that utopian illusions do. For city administrators living in lean times they have learned that the best innovations are the ones bred out of necessity, that balanced, pragmatic, elegant compromise leads to better cities and happier constituents. Practical movements aren't sexy, nor do they have the brand of visceral appeal that can overcome sharp criticism and political gamesmanship. Compromise and collaboration are now the guiding spirits for cities. Institutions like Midtown Detroit or University Circle, Inc. are providing services that cities simply cannot afford anymore, but they are fostering an atmosphere of common enterprise. 

Change is in itself suspicious, but the life of any city depends on its malleability. Bruce Katz of the Brookings Institution spoke to that point this summer to an audience of policymakers and urbanists at the Ford Foundation auditorium, "Cities need to influence the national debate about our economy post-recession." The most effective urban policy decisions since the beginning of the recession in 2007 have not sprouted from the green puritanical dogma of the Occupy movement, but from the lucidly passionate appeals of working people from St. Louis and Cleveland and Pittsburgh and Buffalo and Atlanta.  The progress of people and cities hinges itself on the understanding that the world is not bound for perfection—and that the minor miracles of expelled division and burgeoning equality are borne out not from glossy idealism, but stubborn morality.