John Gallagher

Detroit Free Press

As in food and fashion, there are trends in economic development. Just as bell-bottoms and Farrah Fawcett-style hair look pretty dated now, so too do some of the tactics that cities like Detroit and Flint and Gary and Cleveland have employed in their battle against decline.

Remember festival marketplaces? Or the downtown aquariums that so many cities tried to build? Did casinos ever deliver the economic bang they were touted to do?

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Two professors, Gary Sands of Wayne State University and Laura Reese of Michigan State University, have completed new research that calls into question almost all of the economic development tactics that Rust Belt cities have thrown at decline over the years, including casinos and programs aimed at luring the so-called creative class. They found little or no relationship between those trendy investments and broader community-wide economic growth.

Instead, they suggest a back-to-basics strategy: Invest in good schools and public safety, and don’t bet on the trendy stuff.

“Just run a good basic city,” Reese said in an interview. “That is more strongly connected to growth than all of those economic” tactics. Sands, who is Reese's husband as well as co-author, added, “Absolutely, If you don’t have the basics you’re not going to get anywhere.”

Their research, tentatively scheduled to be published in 2017 in a book called "Roads to Prosperity," could heat up a long-simmering debate about what works in urban redevelopment. These questions never die, even after decades of arguing about them.

Tax breaks

Among the never-settled controversies: Have all the billions of dollars spent on tax incentives for projects like the Ilitch family’s arena paid dividends for the broader community? And, aside from the tax revenue that cities rake off from casinos, do gambling meccas enrich anyone besides the casino owners?

The debate over what works has taken some pretty odd turns over the years. Notoriously, Michigan enacted some of the most generous movie tax credits in the nation in the waning years of Gov. Jennifer Granholm’s administration. For about two years, Detroit became Hollywood on the River, with movie stars dining in local restaurants and millions invested in local studios. Then Gov. Rick Snyder killed the movie credits, and the jobs and tax base the credits created went elsewhere.

It’s not that movie credits were good or bad in themselves, just that whipsawing the industry from year to year was absurd.

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Steve Arwood, CEO of the Michigan Economic Development Corp., said in an interview that Michigan needs not so much a back-to-basics strategy as Sands and Reese suggest as an all-of-the-above approach. Work to improve schools and public safety, yes, but also employ a tax-incentive strategy, like the incentives recently approved to attract a huge cloud computing operation to the Grand Rapids area or the incentives given the Ilitch family to build their new arena in Detroit.

And Arwood said Michigan needs to use a host of other tactics, too, from placemaking strategies to enliven urban downtowns to talent training programs aimed at retaining our young people in the state. And the state continues to try them all, he said.

“Every aspect is important,” Arwood told me. “I think running a good city, creating opportunities, making places for people to stay and retain those folks, are critically important. I wouldn’t say any one is more important than the others.”

For their research project, Sands and Reese culled economic growth statistics for midsize Canadian cities, including Windsor. They looked hard at casino gaming, programs to attract creative-class workers, the stylish New Urbanism development projects and more. They combed the economic data for links that would tie any of the tactics to broader community economic growth.

Their verdict: Almost none of it worked. The projects may have been successful in themselves, but they contributed little or nothing to overall regional economic growth.

Among specific findings: Attempts to build a revival by attracting creative-class workers didn’t seem to work, or at least it was hard to see a correlation in the data on growth, in part because it’s so hard to define “creative class.” As Sands and Reese write, “There is no relationship between improved economic health and any of the creative-class indicators.”

The same goes for a casino strategy.

“Whether in the city center or in a farm field along the interstate, none of the casinos examined appear to have attracted significant additional investment in surrounding areas,” they write.

Immigration did seem to go hand-in-hand with economic growth, they found. But, again, causation was hard to pinpoint. It’s just as likely that immigrants flock to cities with good growth prospects as it is that immigrants cause the growth in the first place.

Nor do so-called New Urbanism projects, which emphasize walkable neighborhoods, bike lanes and pedestrian-friendly retail districts, lead to broader growth. Possibly that’s because such projects are often isolated developments with little spin-off potential for the surrounding city or region.

Isolated events

Nuance is important here. Sands and Reese do not argue that casinos, creative-class projects and New Urbanism don’t contribute anything at all — just that they remain mostly isolated events unconnected to any broader prosperity.

On casinos, Sands said in an interview, “If you can cut a good deal in terms of the government sectors taking revenue, it’s fine,” he said, noting that the City of Detroit reaps hundreds of millions of dollars in casino taxes. But he added, “Basically casinos exist to take every dime that you’ve got, and they don’t want to share it with their neighbors. So there’s no real spin-off.”

And Reese said of tax incentive deals, “If you cut a good deal and you’re smart about using them, then they can work. But it’s all in the deal that you cut. And most of the time cities aren’t smart.”

At this point, it’s also helpful to look at the research from the Boston-based Initiative for a Competitive Inner City. For years, ICIC leaders have argued that cities should look at their competitive strengths — manufacturing in Detroit, casinos in Las Vegas, the movie business in Hollywood — and leverage those clusters in community-wide ways.

Detroit, for example, enjoys a health care cluster in Midtown with both the Henry Ford Health System and Detroit Medical Center based there, employing thousands of workers. To get the most out of that cluster, Detroit ought to do many things. It could offer job training programs in the health care industry. It could create mentoring programs for entrepreneurs with health-care startups. Detroit could create programs to connect supplier firms to the larger anchor institutions. And, critically important, this region needs to improve public transit to help low-income workers get to their hospital jobs.

“We fundamentally believe that inner cities need to be connected to their regional economies,” said Kim Zeuli, senior vice president and director of research for ICIC. Unless connected regionally, tactics remain relatively isolated. “They’re not going to have really transformational impacts," she said. "You could have a lot more (impact) long term by having a more strategic approach where everything is aligned.”

The challenge, of course, is that politicians don’t win elections by connecting clusters. They’d rather be cutting ribbons on aquariums or casinos or downtown malls.

Yet researchers like Sands and Reese are on to something here. It may not be sexy. And it’s not short term. But in urban economic development, as in life, if you take care of the basics, the frills tend to take care of themselves.

Contact John Gallagher: 313-222-5173 or gallagher@freepress.com.