A Two Percent Solution for Downtown Rochester (NY)

Bruce Katz
Bruce Katz Founding Director of the Nowak Metro Finance Lab - Drexel University

February 12, 2008

Thank you for this invitation. It is an absolute pleasure to be back in Rochester for this important series.

I want to thank Roger Brown for being my teacher and guide before and during this visit. Roger described the exciting things that are underway in the city and downtown and, as importantly, gave me a much needed tour of the beautiful and inspiring and the good, the bad and the ugly. So, I feel a bit grounded – putting images on the faces of the Falls, the Inner Loop, the Midtown Plaza, the Sibley and dozens of smaller landmarks and projects.

Today I want to place the work you do in the context of the broader forces affecting our country.

The United States is going through a period of dynamic, volatile change, comparable in scale and complexity to the latter part of the nineteenth century.

Large demographic forces – population growth, immigration, domestic migration, aging -are changing patterns of consumption and settlement and lifestyle. The prototypical family of the suburban era – a married couple with school age children – is now less than 25 percent of all American households.

Broad market forces – globalization, technological innovation, standardization – are restructuring the U.S. economy, changing what we do, how we do it and where we do it.

As the world’s largest energy consumer and largest emitter of greenhouse gas emissions, the United States already faces hard choices on the environment … and we are estimated to grow by another 120 million people by 2050. By 2030, America is projected to double its built environment of homes, apartment buildings, and commercial, office and retail facilities. The question for the nation is, therefore, not whether we grow but how we grow, where we grow and what we grow.

To compete in this new world, metro areas need to focus intensely on the assets that drive prosperity – innovation, human capital, and infrastructure being the most prominent.

But metros also need to focus on the quality of the places you are building and sustaining – the topic of my talk today.

How You Grow Physically Affects How You Grow Economically.

For the first time in a long time, cities, downtowns, urban places and the urban form matter again as a competitive proposition.

Here is my thesis:

First, broad demographic, economic, fiscal, and cultural forces are increasingly promoting diversity, density, and urbanity and are fueling a visible though uneven and incomplete resurgence of American downtowns and cities.

Second, Rochester’s downtown is beginning to exhibit strong signs of rebirth, but this trend pales in comparison to the relentless decentralization of economic and residential life in the broader metropolis and Western NY and is happening in spite of a host of policies – state and federal – that still tilt the playing field towards greenfield development.

Finally, the full potential of Rochester’s downtown will not be realized until city and metropolitan policies are aligned and New York State fully engages with smart, strategic policies to promote redevelopment and curb sprawl. The time for such alignment could not be better – fueled by your success to date, the changing policies of the Spitzer Administration and the tantalizing prospect that the federal government will get its act together.

I propose that Rochester set your sights high and strive to attract at least 2 percent of your metropolitan areas to live downtown. This goal – which could translate into more than 20,000 people living downtown – would have the “critical mass” necessary to spark a virtuous cycle of growth in the city and metropolis.

I think such a goal is realistic and achievable and an essential complement to the myriad of economic and education activities now being pursued.

So let’s start with the big picture.

As I have said before, there are profound demographic and market forces at play in our economy and society.

I strongly believe that these forces are giving cities and urban places a better shot at attracting and retaining residents and businesses than at any time since the 1950s.

Demographic diversity dramatically expands the universe of families who either seek urban living or are willing to experiment:

  • Immigrant families who seek tolerant and welcoming communities:
  • Elderly individuals who seek places with easy access to medical services, shopping and other necessities of daily life;
  • Middle aged couples whose children have left the nest and are open to new neighborhoods and shorter commutes; and
  • Young people who are experimenting with urban lifestyles popularized on television shows like Seinfeld, Sex and the City, and Friends.

The restructuring of the American economy also gives cities and urban places a renewed economic function and purpose.

An economy based on knowledge bestows new importance on institutions of knowledge – universities, medical research centers – many of which are located in the heart of central cities and urban communities.

More generally, the shift to an economy based on ideas and innovation changes the value and function of density.

The advanced, technologically sophisticated firms that now drive the American and global economy crave proximity … to thick pools of qualified workers, to specialized legal and financial support that often require face-to-face interaction, to institutions of higher learning, to modern infrastructure, to quality urban places with the amenities that talented workers demand, and to other firms so that innovations can be rapidly shared.

Futurists predicted that technological innovation would free us from place. The opposite has occurred. Cities and metros concentrate the assets that drive prosperity and are the engines of national growth.

Finally, the evidence shows that the urban form is not only competitively wise, but fiscally and environmentally sound.

  • We have known for decades that compact development is more cost efficient – both because it lowers the cost of delivering essential government services (police, fire, emergency medical) and because it removes the demand for costly new infrastructure.
  • The fiscal benefits of density matter immensely in this state because of the huge infrastructure demands that you have and the transportation finance crisis that you face. The simple fact is that you simply cannot afford to expand your highway and transit capacity, maintain your surface transportation system, and reconstruct or even demolish other infrastructure that is now obsolete.
  • As for the environment, dense urban places are “green” in ways that are increasingly understood in the context of climate change. They reduce auto dependence, shorten commutes, promote reuse and offer the economies of scale for retrofitting of homes, commercial and industrial buildings.

A changing economy and society, in short, revalue the assets of cities:

  • Physical assets like waterfronts, historic buildings, pedestrian friendly neighborhoods and transit rich corridors;
  • Economic assets like higher educational institutions and health care facilities (the so-called “eds and meds”), downtown employment centers, and other regionally significant nodes of employment;
  • Cultural assets ranging from the iconic like museums and sports stadium and theaters to the street level mix of restaurants, art galleries, and daily hum of pedestrians.

The bottom line is this: city downtowns seem uniquely suited for the demands and preferences of a growing part of our population and economy. These places have the physical “bones” – walkable streets, sidewalks, the historic buildings, and other established infrastructure – that can accommodate a range of residential, commercial, retail, governmental, and cultural functions.

And this is not just theory:

Across the United States, city downtowns are experiencing a second life with substantial increases in homes, lofts, condos, apartments, and mixed use complexes.

Analysis by Genie Birch for Brookings shows that the downtown population in a national sample of cities grew by 10 percent during the 1990s, a marked resurgence following 20 years of overall decline.

During the same period, the number of downtown households increased 13 percent, representing an increase, among other things, in the number of smaller households of singles, unrelated individuals living together, and childless married couples.

Those who believe this level of revival is happening only in hot metropolitan markets should look to Europe.

There, former industrial cities like Belfast, Manchester, Bilbao, and Torino are taking battered, beaten urban cores and infusing them with new life and amenities—restored canals, boulevards rather than freeways, revitalized waterfronts, preserved historic buildings, and new, iconic museums.

Restore the Core has become the European answer to deindustrialization … and has catalyzed not only the revitalization of downtowns but the transition to the next economy.

So how is Rochester’s downtown faring?

Well, in recent years, pretty well. Employment concentration remains high with new employers like ESL and PAETEC on the way. Residential population is rising, interesting pockets of urbanity are emerging, and a new state administration is taking notice and adding value.

The sense of momentum is palpable, real, and infectious.

But the broader context remains sobering.

Like many other metropolitan areas in the Northeast and Midwest, the Rochester metro -the 50th largest in the nation – is struggling to transition from an older economy centered on manufacturing toward the new economy of knowledge, innovation, and entrepreneurship.

Despite slow growth, rapid sprawl dominates the metropolitan landscape, hollowing out the city, leaving concentrated areas of poverty and placing enormous fiscal stress on the city.

Between 1990 and 2006, the Rochester metropolis grew by 3.3 percent of its population. The city of Rochester lost about 11.5 percent of its population.

Buffalo’s core population is half what it was when Harry Truman was President; Rochester, Syracuse, and Albany are each a third smaller today than they were in 1950.

With unbalanced growth, residential density—the ratio of population to urbanized land -has declined precipitously in this region. Rochester saw a 14 percent loss of density from 1982 to 1997.

As people go, so do jobs. That is a nice cliché because it is actually true.
The suburbs now dominate employment growth. They are no longer just bedroom communities for workers commuting to traditional downtowns. Rather, they are strong employment centers serving a variety of functions in their regional economies.

The American economy is rapidly becoming an exit-ramp economy with office, commercial, and retail facilities increasingly located along suburban freeways. A new spatial geography of work and opportunity has emerged in metro America. Across the largest 100 metro areas, on average, only 22 percent of people work within three miles of the central business district, while almost 45 percent of all jobs are located more than 10 miles outside the center.

Fortunately for Rochester, employment in the metro remains fairly centralized, given the location of major employers near the central business district. Yet newer employment is shifting outwards. In 2004, almost a third of jobs (32 percent) were located within three miles of the central business district, compared to 20 percent that were more than 10 miles outside the center. But, these numbers are changing quickly. Between 1998 and 2004, your metro lost over 2 percent of jobs within three miles of the central business district, while gaining another 1.1 percent of jobs located more than 10 miles away.

Now here’s the kicker. Despite conventional wisdom to the contrary, these trends of population and employment decentralization are not only driven by market and consumer forces.

Rather they are dramatically influenced by federal and state policies that set what I call the “rules of the development game” – rules that favor the creation of new communities over the redevelopment of older ones and subsidize greenfield development rather than brownfield remediation.

Let me be more specific:

A recent Brookings report in Pennsylvania illustrated how sprawl was embedded and hardwired in an intricate network of state spending, tax, regulatory, and administrative polices.

  • State governance policies that support incredible localism among hundreds of suburban municipalities, each able to compete favorably with cities and older communities because they can benefit exclusively from job growth without taking responsibility for traffic or worker housing.
  • State tax policies that leave cities stranded with tax exempt properties and saddled with the costs of maintaining older infrastructure.
  • State transportation policies that spent only 42 percent of road and bridge spending in older urban communities, where 58 percent of the population lives.
  • State housing policies that, under the guise of neighborhood renewal, often reinforce the concentration of poverty rather than enhance access to opportunity.
  • State economic development policies that subsidize new office parks rather than remaking main streets and historic corridors.
  • State building codes that makes it cheaper to build new rather than renovate older properties.

Does New York State look like Pennsylvania? Absolutely, according to numerous studies conducted over the years by independent, objective researchers.

Let’s just take fragmented governance as a case in point.

The Rochester metro has 78 towns, 5 counties, 40 villages and three cities.

In the past, research focused on demonstrating that increased government costs result from fragmentation. This follows from the simple fact that political fragmentation often leads competing jurisdictions to duplicate infrastructure, staffing and services that could otherwise be provided more cost effectively.

Yet newer research is showing another important implication.

Fragmentation exacerbates sprawl and weakens cities. Research shows that increased fragmentation correlates with decreased shares of office space within central business districts, less centrality, longer commuting times, more edge cities and more sprawl. In this connection, fragmentation not only inhibits coordinated planning to manage growth, but also spawns a sprawl-inducing competition among the states’ multiple jurisdictions for desirable commercial, industrial and residential tax bases.

The confluence of fast sprawl and slow growth leads to weaker cities – right at the very time when cities have a special function to play in the economy.

A host of other policies – tax, transportation, housing, education – all point in the same direction, away from city revival and towards sprawl on the periphery of the metropolis.

Yet I believe that a growing number of states, including New York, are ripe for change:

  • because they are experiencing the fiscal wastefulness of unbalanced growth patterns;
  • because they recognize that an economy of ideas, innovation, and creativity thrives in dense, urban areas; and
  • because they are worried that endless sprawl is endangering the rural landscapes and environmental treasures that define many places.

Let me give you a hopeful lesson from some of our state work.

In Pennsylvania, the confluence of powerful ideas, a progressive Governor (Ed Rendell, the former Mayor of Philadelphia) and a vocal network of advocates is already reforming policies:

  • The state is embracing “fix it first” policies in transportation – stopping sprawl inducing road projects at the fringe in order to fund infrastructure repair in the metropolitan core.
  • The state has resuscitated a State Planning Board to bring coherence to the actions of dozens of state agencies.
  • The state has revitalized an Interagency Land Use Team to better focus the state’s actions and investments.
  • The governor recommended – and voters approved – a $650 million bond issue -for spending on both environmental protection and urban revitalization, illustrating the potential for common ground between urban, suburban and rural communities.
  • The executive branch has created Community Action Teams to pull together all state programs and agencies in the service of downtown revitalization.
  • The Governor is pursuing bold new reforms to prepare the Pennsylvania workforce for a radically different economic era.

My sense is that Governor Spitzer, his team, and the legislature are beginning to follow the Pennsylvania playbook.

The recent announcement of a $1 billion Upstate Revitalization Fund is replete with references to the need for strong, vibrant and living downtowns – indicative of a fundamental shift in philosophy and perspective.

So where do you go from here?

In an increasingly demographic, economic, political and policy environment, how do you achieve the 2 percent solution and truly transform your downtown, city and metropolis?

Five strategies stand out:

  1. Continue to encourage residential development in the downtown and the preservation and adaptive reuse of historic structures;
  2. Make significant transformative investments in reconfiguring the freeway infrastructure – the Inner Loop – surrounding the downtown;
  3. Reclaim your river as the true market shaping and metropolitan defining asset it is;
  4. Encourage your universities to establish a strong presence in the downtown; and
  5. The toughest strategy – restore a spirit of collaboration and comity to city and suburban relations.

Accelerate residential development activity:

You are already on your way towards achieving the first strategy. The challenge is to increase the volume and speed and frequency of redevelopment and revitalization efforts.

Now clearly, additional state resources will help towards not only preparing sites for development but to also deal with the parking and other issues that will naturally emerge from increased activity (and the conversion of surface parking lots to residential and mixed use facilities).

But I also urge you to think of additional ways to deliver the promise of a living downtown.

You should consider whether to create a special, quasi-public development corporation to drive residential development at a quicker pace and under a coherent framework. Such corporations have been used to great effect in other cities, most notably Washington, D.C. and the well known restoration of Pennsylvania Avenue.

You should also consider embracing new private and philanthropic vehicles for investment. There are a number of proven models in other cities where, for example, foundations are providing “patient capital” to make downtown residential deals work, essentially waiting in line for their returns until projects are seasoned and yield returns. Perhaps a special investment vehicle can be created in this city and metropolis to complement public resources and conventional debt financing.

Transformative Infrastructure Investments:

Transformative investments in infrastructure are also a key ingredient for success. New York State and its older industrial cities need to identify the obsolete freeways that hold downtown centers in a choke hold. Transforming eyesore freeways into human scale boulevards, for example, as cities like Providence, Milwaukee, San Francisco and Portland have done, will reconnect downtowns with the surrounding city, free up acres of potentially valuable land for redevelopment and markedly improve the visual landscape.

The Inner Loop surrounding the downtown qualifies for such treatment, as does I-81 in Syracuse and several freeways in Buffalo.

The time to plan for the successor to the Inner Loop starts now. From a practical perspective, the freeway is approaching the end of its useful life and needs substantial repair to keep functioning. But there is another reason to start. In 2009 or 2010, the federal government is likely to enact a major authorization of federal transportation programs. Cities like Rochester need to ensure that reconfiguring older, obsolete freeways like the Inner Loop become part of the discussion.

Reclaiming the Riverfront:

Reclaiming the riverfront falls into a similar category. Your river is one of the most powerful, if hidden, assets in this city and metropolis … but today its power and potential is unrealized.

Our rivers, lakes and waterfronts are as necessary a part of urban infrastructure as highways, transit and rail. As with historic buildings and distinctive landmarks, they key here is to set an ambitious local vision (based on successful waterfront developments in the U.S. and Europe), amass local and state support and capital and work with similarly situated cities and metros, particularly in the North East and Midwest to galvanize a new generation of smart public investment at the federal level, perhaps done in concert with new energy and climate legislation. As with the downtown, there may be promise in creating a special entity with focused responsibility for developing the riverfront.

Expanding Universities Downtown:

A complementary way to convert older downtowns to vibrant and vital centers is to locate new college and university campuses there. This has already begun to great effect in Buffalo, Syracuse, and Schenectady and should be a major focus of Rochester given the current location of your major institutions of higher learning.

Higher education institutions are not only major employers but incubators of new, creative businesses and jobs. And they create a pool for potential downtown residents, through their faculty, students and other employees.

State investments as well as moral suasion may be key here.

Advancing City/Suburban Collaboration:

The final piece—city/suburban collaboration—may the easiest to articulate but the hardest to achieve.

But the concept could not be more timely. At a time of intense global competition and economic restructuring, Rochester’s jurisdictions should be collaborating to compete rather than competing against each other.

And they should be collaborating specifically on restoring the downtown core.

The logic is undeniable.

A 2 percent solution will create a healthy and vital city.

A healthy and vital city is essential to a healthy and prosperous metropolis: higher property values, a growing job and retail base and a community that gives the children of current residents a reason to stay rather than move to places with quality urban cores.

Here too the state is critical.

They can not make the city and suburbs love each other and magically erase decades of division and strife.

But they can insist upon on a level of collaboration in transportation, energy, housing and land use planning and decision making … rewarding those places who behave and punishing those who don’t.

Let me conclude with these thoughts.

I believe we are at an historic inflexion point for our nation, cities and metros.

Large demographic, economic, fiscal and environmental forces are coming together to make cities and downtowns relevant again.

An urban age is dawning around the world and in the United States.

Rochester has all the ingredients necessary to participate fully in this new age and reap the substantial benefits that are accorded a distinctive, innovative and historic community in today’s economy.

My recommendation: seize the moment and build on the incredible assets bequeathed by nature and previous generations.

Rochester is a grand and proud city that has the potential to be truly great again.