Thursday, October 13, 2005

The Creative Class as saviors of old cities

I've been doing some thinking about Richard Florida's Creative Class strategy for cities (his site), and why it became so popular so fast with cities all across the country. Part of it was the allure of the Internet boom, which it perfectly complimented. Everybody wants to be the next Silicon Valley. But I think there's a bigger-picture, longer-term story of cities that explains why the ground was so fertile for a Creative-Class-type theory to be accepted so rapidly across such a large swath of the country.

I think the nutshell story for a lot of cities over the last 60 years is as follows:
  1. People keep moving farther out for bigger, newer, cheaper houses
  2. This suburban growth leads to traffic congestion and transit hassles
  3. Employers move to the suburban "edge cities" to follow their employees and reduce commutes
  4. Old core cities are left with a deteriorating tax base as jobs move out, lower income families (often immigrants) move into their old housing stock, and inner city schools continue to decline relative to the suburbs
The result is a stagnant or even declining central city in a thriving metro. If you're the mayor of one of these cities, what can you do? Everything requires money, so how do you increase the tax base? You have nothing of interest to employers. They're comfortably ensconced in their suburban towns on the fringe, usually along the beltways. And any middle class or higher family takes one look at the schools and says "no thanks."

Into this desperate situation comes Dr. Florida with the miracle cure: attract well-off childless households like singles, young or empty-nest couples, and gays. "Childless household" is not a very sexy term, so they become the "creative class" - and who doesn't want to be a part of that? This demographic is the perfect target customer for old cities: they provide tax base, don't care about schools, and are looking for something different from the plain-jane, child-safe, Disney-approved suburb. VoilĂ ! A match made in heaven. Just revitalize a few funky neighborhoods here or there, have the feds build you some cool light rail, get some nightlife, arts organizations, and a few gay bars and you're good to go. Sure, you have to get crime under control, at least in those neighborhoods, but a little focused police attention for a while should do the trick.

So the new metro model can be thought of as three concentric circles:
  1. A core of creative class, immigrants, and low-income neighborhoods with older housing stock and mediocre schools (although hopefully on an improving track)
  2. A ring of employers, usually along the loops and beltways
  3. The suburbs and exurbs of families

This model is very transit-unfriendly because the employers tend to be dispersed along the rim. But even if those in the core have to drive to work, they probably have a not-so-bad reverse commute. And hopefully those core creatives are paying taxes that will help the old city upgrade its infrastructure, neighborhoods, and schools.

The counter-argument to the creative class theory tends to sum up as "forget the fluff, focus on fundamentals like taxes, schools, crime, mobility, and infrastructure." And I think that's absolutely the right strategy on a metro-area basis, but before old core cities can have the money to reduce taxes, improve schools, reduce crime, increase mobility, and upgrade infrastructure, they have to have the tax base to pay for it, and the creative class approach is the easiest way to get there. The "low hanging fruit," if you will.

Houston has been lucky enough to avoid some elements of this story. First, we invested a whole lot in freeways and HOV transit to help keep employers in the core. Second, for those employers that did leave, annexation allowed us to keep growing the city limits to include them so we didn't lose the tax base (Greenspoint, Clear Lake, Energy Corridor, Westchase, Willowbrook/HP, etc.). This is why you don't hear quite as much about the creative class here as in many other cities: we never declined to the point we were that desperate to attract tax base. There was some talk during the Internet bubble about Houston having trouble attracting top talent nationally, but that seemed to fade away with the bubble collapse and the recession: jobs trumped coolness. And anybody who's watched our core evolve the last 10 years or so can see that we've come a long, long way on the coolness factor, which the rest of the country is just barely starting to notice.

So what does all this mean? I think it means that Houston has a real shot at becoming one of the next great world cities. We're making a lot of progress on attracting the creative class tax base, and we still have most of the employers in the core due to strong mobility investments, and HISD is one of the best urban school districts in the nation, and our lack of zoning makes core redevelopment of our housing and commercial building stock much easier than most cities, and we're the lowest cost-of-living major city in America. That gives us a tremendous financial base we can use to tackle any problems and invest in "great city" infrastructure like museums, parks, transit, stadiums, education, charities, libraries, top restaurants, and arts and entertainment organizations. If we keep up this momentum, we should expect to see great things in the coming decades...

12 Comments:

At 3:12 AM, October 15, 2005, Anonymous Evan said...

You nailed it.

 
At 8:48 AM, October 17, 2005, Anonymous Anonymous said...

I think you've set up a false dichotomy, so I disagree with Evan's assessment that you've "nailed it".

Does focusing on attracting a certain group of people or businesses mean that a city's government stops repairing and replacing water and sewer lines, fixing potholes, reducing crime, and so forth? Of course not. Think about how the provision of these services is split in a local government's organization. For example, in many localities the water and sewer revenues pay for the major water and sewer projects. This is completely independent of a discussion of the creative class.

And with regards to "but before old core cities can have the money to... improve schools," keep in mind that the school districts are separate from the city government. The school district doesn't spend anything on attracting "the creative class" or any other group.

 
At 10:01 AM, October 17, 2005, Blogger Tory Gattis said...

Property and sales taxes make up a big part of local govt and school district revenue. CC presumably increases property values and buys lots of stuff (sales taxes), adding revenue to those entities and increasing their budgets, which can then be spent on the previously mentioned projects.

But before all that can happen, the city has to take money from somewhere, and invest it in specific neighborhoods to make them attractive to the CC. That is a controversial investment, because that money could be going to more "basic" investments.

 
At 11:13 AM, October 17, 2005, Anonymous Anonymous said...

With regards to "But before all that can happen, the city has to take money from somewhere, and invest it in specific neighborhoods to make them attractive to the CC. That is a controversial investment, because that money could be going to more "basic" investments."

- that's what I'm getting at. Cities (at least most cities) don't just pull money out of a sewer project or a purchase of garbage trucks to pay for attracting the Creative Class. That's not how city government is set up. Some of this would probably come out of economic development funds, which is one of the pots where it should come from. If a city chooses to starve basic investments, chances are that's part of a long term pattern of neglecting the basics (whether voluntary or not). But for those who argue that by trying to attract the CC you are taking $ away from the basics, I haven't seen anything tangible and comprehensive to verify that that is the case.

 
At 2:03 PM, October 17, 2005, Blogger Tory Gattis said...

Usually it's more subtle: certain neighborhoods get extra police vigilance, or park and library renovations, or more road and infrastructure improvements than their population would normally justify (say 5% of the city gets 20+% of certain budgets). The budgets don't change, but the focus of their efforts does, leaving other areas with less CC gentrification potential relatively shortchanged.

 
At 2:58 PM, October 17, 2005, Anonymous Anonymous said...

What you've just articulated are bread-and-butter city services, and the usual pull amongst neighborhoods and interests to get as much as they can. As you said - "certain neighborhoods get extra police vigilance, or park and library renovations, or more road and infrastructure improvements than their population would normally justify".

But what you said in your lead entry is "The counter-argument to the creative class theory tends to sum up as "forget the fluff, focus on fundamentals like taxes, schools, crime, mobility, and infrastructure." "

So where's the fluff?

Is there research out there that shows that cities are spending massive amounts of money on just certain neighborhoods at the expense of all others under the banner of creative class theory, for investments that would be considered fluff?

If the answer is that it's more subtle, that certain neighborhoods are just getting (or asking for) a disproportionate share of resources, well that's nothing new, and it long predates creative class discussions.

I'm just trying to understand the counter-argument to creative class theory, and this notion of fluff expenditures. I'm not trying to be contrary for the sake of being contrary.

 
At 3:19 PM, October 17, 2005, Blogger Tory Gattis said...

Good points. I don't know the answers or of any studies. I have heard examples of cities subsidizing restaurants, museums, or specific developments they want, usually through tax abatements - sometimes with direct spending. For instance, the city of Houston just created a specific TIRZ for a retail development downtown, which in theory will help attract the CC downtown. Others would argue the TIRZ is unnecessary and gives up tax revenue that would be useful elsewhere. Still others would ask why we give specific retail developments incentives but make others pay full costs, putting them at a competitive disadvantage.

I have noticed a disturbing trend in retail developments: design something really big, almost a tourist attraction, get local politicians hooked, then ask for big govt subsidies (however structured: TIRZ, sales tax givebacks, property tax exemptions, etc.) - then proceed to beat all your retail competition because you have subsidies and they don't. The city usually ends up losing, because they've just transferred sales from stores that were paying full freight to those that aren't, just to get a trophy development.

 
At 4:01 PM, October 17, 2005, Anonymous rj said...

Tory -

RE: I have noticed a disturbing trend in retail developments: design something really big, almost a tourist attraction, get local politicians hooked, then ask for big govt subsidies (however structured: TIRZ, sales tax givebacks, property tax exemptions, etc.) - then proceed to beat all your retail competition because you have subsidies and they don't.

True. I worked on a deal just like that not long ago for a city in the Houston metro area, and it just amazed me that the company felt they could dictate terms, because frankly they had succeeded in doing so from coast to coast. I had to hold my nose through the entire thing.

A key wrinkle in these deals is that while the city will no doubt cannibalized some retail sales in their own city, they are also taking sales away from other neighboring jurisdictions and moving them to their own city, which is part of the attraction. (why not, if the other guy would do the same to you?) That comment is probably less relevant to the City of Houston than say Sugar Land or Missouri City or League City or Friendswood etc. With these regional-attraction retailers, there are also sales pulled-in from outside the metro area, and probably a degree of new retail sales created that otherwise would not have happened.

I hate to see local retailers get stiffed like this. They often help to define what's unique about a place and also foster a sense of community.

 
At 5:02 PM, October 17, 2005, Anonymous Anonymous said...

In reference to "I have heard examples of cities subsidizing restaurants, museums, or specific developments they want, usually through tax abatements," this of course happens quite a bit, as you and rj pointed out, and maybe a city tries to raise the CC banner in some of these instances. But again, this sort of activity (for better or for worse) has existed well before Richard Florida published his book.

 
At 6:03 PM, October 17, 2005, Blogger Tory Gattis said...

True. CC simply gives them an excuse.

 
At 2:20 PM, March 20, 2006, Anonymous Anonymous said...

This discussion has gotten way off track. Florida's premise is simple. People who are talented have a choice of where to live, and business and jobs over time follow these people. More and more this "creative class" is influenced by quality of life---the appearance of the community in part, but more importantly the lifestyle that it offers, including recreation that is easily and routinely accessible and public spaces in which one feels part of a real and vibrant community. These desires and values are not in opposition to "the basics." One might instead argue that these amenities depend on having the basics taken care of at some level. The point is that the basics are not enough.

The problem in Houston is twofold. One, we have paid so little attention to creating a decent appearance for the city and amenities accessible to the public that we are behind. Two, we have designed our city to be so spread out that providing the basics is disproportionately expensive---providing police, city services over so many square miles to relatively few people is more expensive than it should be.

 
At 3:09 PM, March 20, 2006, Blogger Tory Gattis said...

1) True, but improving fast.
2) Houston is the least expensive major city in America, inc. the tax burden for services.

 

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