I sat down with a young man last week who was trying to learn more about Camden. Despite not living, working or being from the city, he’d taken and interest and was becoming more involved. Almost the first words out of his mouth were, “we’ve seen that throwing money at cities doesn’t solve anything.” But have we? It’s an important question, particularly as a $260 million corporate was just approved to bring Holtec to Camden, only weeks after over $80 million went to the 76ers for a practice facility. This is one of the unintended consequences of huge corporate subsidies; the poor get blamed when the subsidies don’t raise living standards across the city.
Once upon a time, waterfront development in Camden followed the Baltimore model; attractions such as a baseball stadium and aquarium (as well as a major concert venue in Camden) were supposed to bring visitors to the city, who in turn would spurn investment into the waterfront, which would trickle down to the rest of the city.
That isn’t how it happened, and there is significant bitterness across Camden that dollars have focused on the waterfront while neighborhoods have serious infrastructure failures. That bitterness will only get worse with these new deals. The 76ers practice facility and Holtec International subsidies do not even have the previous development’s tenuous link to helping the majority of residents. They throw money, inefficiently, at the lack of jobs in the city. Amazingly, there is no strong theory behind how this will help the majority of Camden residents.
Photo by Carly Q. Romalino (Courier-Post)
It’s been hard to get my head around these staggering subsidies, or how blatant corporate subsidies could be conflated with helping Camden’s residents. So I did what professor’s often do, I went to the library. I picked up Swanstrom’s The Crisis of Growth Politics. In it, he explains how the exact same thing happened during urban renewal. It started, in the 40s, by clearing urban neighborhoods to build subsidized housing. But, developers didn’t want to build for people without the money to buy. That, combined with cities that felt like federal dollars were “funny money,” meant that money earmarked for affordable housing went towards commercial development to help downtown areas.
Sound familiar?
The politics in Cleveland, Swanstrom’s main case study, have remarkable resonance now. Swanstrom talks about responses to such growth politics:
In one bold sweep, the Krumholz planners redefined the urban problem: no longer the lack of investment or the flight of the middle class, it was now defined as the lack of choices available to those who presently lived in the city. The solution no longer centered on enticing investment or the middle class into the city (essentially increasing their choices) but improving the choices of those who had remained behind.
…
The test for any policy becomes: does it benefit the least advantaged, those with the fewest choices? Subsidies for downtown development could be justified, then, if the benefits of the new investments trickled down to those at the bottom. When the Krumholz planners analyzed specific development proposals, however, they usually found that the benefits, especially to the neighborhoods, were far less than advertised.
Once again, if I may: sound familiar? If not, read these harrowing tweets by NJ Policy Perspective showing that benefits are stretched over 35 years, but the subsidies run out much sooner:
$260M #TaxBreak for Holtec requires they stay for 15 yrs. Econ impact estimate uses 35 yrs. Heavy risk if they leave pic.twitter.com/s86hfdnd46
— NJPolicyPerspective (@NJPolicy) July 10, 2014
Worth noting: If #76ers only stay for required length of time, the "net benefit" to NJ as calculated by the state will be *negative* $14.5M
— NJPolicyPerspective (@NJPolicy) June 12, 2014
Camden, far from being on the cutting edge of policy, is replaying bad history. Its emphasis on its waterfront and downtown at the exclusion of other residential areas is following a disturbing trend. Initial development on the waterfront was a failed effort to spur a Baltimore Harbor-like renaissance that would lead to trickle down revenues for Camden residents. These latest efforts make little claim to helping the rest of Camden, and there is little that indicates they will. So when we say: throwing money at cities hasn’t solved anything, let’s be very clear who is catching all that money.
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1) Philadelphia has recently invested in waterfront projects to spruce up underutilized piers. Has there been research about the economic impact of those projects?
2) An issue with the recent deals with the Sixers and with Holtec is that they do not create opportunities for small business investment in the waterfront area. These businesses will bring their employees with them but how can those employees stimulate the local economy without having a nearby “main street” with restaurants and other businesses to frequent? Currently most of the area around existing waterfront properties just consists of parking lots. Ideally bringing in 400+ new employees to the area also results in more money being spent on local businesses who employ local residents. Throwing money at big businesses to get employees here should be coupled with incentives for small business investment.
Steve,
Another great post!
Two points.
1) The development model taking place in Camden – a local government working to replace the low-income residents it is supposed to represent with a wealthier population – is one that has played out repeatedly in other communities, such as New Brunswick. In Camden’s case, the alignment of interests between the Christie Administration and the George Norcross political machine that controls Camden has made that effort more blatant: http://www.njspotlight.com/stories/14/07/11/chris-christie-and-america-s-poorest-city/.
2) Economic development research has consistently found that tax abatements and other direct financial subsidies that governments give to corporations in order to “attract” or retain them, are ineffective. Large corporations move to a location or stay there because it makes business sense for them to do so. Tax subsidies are rarely large enough to figure into those calculations.
What does? Broader business decisions that the location will impact – e.g., transportation expenses, access to suppliers and markets. Also key are quality of life issues that impact senior managers, who are making the decisions. Is the commute reasonable? How good are the public schools in the vicinity where the managers are likely to live?
Ironically, the good infrastructure and high quality public schools that attract companies to a location draw on the same tax dollars that the tax abatements divert to corporate profits.
The generous tax abatements have become a race to the bottom for municipalities and states, with corporations playing them off against each other to get the largest gift they can from the taxpayers.
That is not good for anyone but the corporate shareholders.
There is a broad literature on how to effectively improve the economy of a region through building infrastructure and providing access to high-quality facilities and job training and investment capital. So far, Camden does not appear to be following that model.
Interesting points made here. A couple of questions/thoughts:
1. When there are earmarks for urban renewal, would it make sense to use a significant portion of these funds to provide training (and jobs) to the people to design and build the communities themselves?
2. The trickier question becomes – who would successfully administer and oversee something like this scenario?
Again, good read – I prefer thinking about stuff over the radio as I set out for my too long commute – this gave me something to think about!