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A Private Sector Model for Rebuilding Inner-city Competitiveness: Lessons from MidTown Cleveland

The economic decline of America’s inner cities has been recognized as a major national problem for the past three decades. But the work of combating it has been left largely to local community groups and public officials, with less than satisfactory results. Some believe that for inner-city revitalization to succeed, a radically different approach is needed.

This new approach is known as community capitalism, and advocates say that it must be led by the private sector.

The term “community capitalism” was coined at the 91st session of the American Assembly, which issued the report, Community Capitalism: Rediscovering the Markets of America’s Urban Neighborhoods. This 1997 report was strongly influenced by Michael Porter’s work on the “competitive advantage of inner cities.” The report defines community capitalism as for-profit, business-driven expansion of investment, job creation and economic opportunities in distressed communities.

Community capitalism asserts that the benefits of American capitalism can be applied to our inner cities to create both “profitable growth and improved societal conditions.” The experience of MidTown Cleveland demonstrates that the private sector has a vital role to play, but it cannot by itself power urban revitalization. The private sector needs local government and community entities as its partners. This paper explains: (1) ways in which the private sector can make the market work in inner-city commercial and industrial neighborhoods; (2) the role of a nonprofit business-backed institution in rebuilding central city economies; and (3) the practical lessons from MidTown Cleveland that can help guide the creation of a national strategy for revitalizing urban neighborhoods.

The 15-year experience of Cleveland’s MidTown initiative offers a highly instructive model for rebuilding inner-city competitiveness that is different from conventional economic revitalization models. MidTown is a nonprofit, business-driven inner-city initiative that has succeeded in creating an economic climate for reinvestment, business growth and job creation within an older inner-city commercial and industrial area.

Elements of a Neighborhood Competitiveness Strategy

There are four key elements of a competitiveness strategy that emerged from the launch, growth and success of MidTown Cleveland:

  1. Develop strong community leadership and an organization MidTown Cleveland is a one-square-mile, 55-block area just east of downtown Cleveland. In the early 1980s, it was primarily an industrial and commercial zone, with about 400 businesses, 13,000 employees, 570 property owners and 3000 residents. It was also an area undermined by business flight, vacant buildings, crime, vice and blight.

    Following a six month feasibility study, 46 MidTown corporate, small business and institutional leaders decided to incorporate to address the area’s problems. MidTown stakeholders created a non-profit organization to deal with the issues that concerned them directly: security, neighborhood appearance, public image, the productive use of land and buildings, and the development of a cohesive business community. Strategies were divided into short- and long-term plans, while modest goals were set and achieved to build confidence and capacity.

  2. Shape a competitive market environment in the inner city Porter and others argue that inner cities are located in what should be economically valuable areas and that, as a result, they can offer a competitive edge to companies that benefit from proximity to downtown business districts. However, in the early 1980s, many MidTown companies needed compelling reasons to remain in the inner city. The pull of safer, cleaner and greener areas had taken its toll not only on individual businesses, but on the entire neighborhood. Inner-city competitiveness involves much more than strategic location. Making inner cities truly competitive with their suburban neighbors requires attention to practical realities and changes in governance. MidTown businesses rallied around a shared commitment and strategy to make their community safe, clean, attractive, marketable and profitable. They worked with the city police to keep businesses and sidewalks–and therefore, employees and customers–safe. They defined an agenda for physical development and sought state and federal grants and loans for a land banking project that would make central city brownfields more competitive with suburban greenfields. A successful strategy emerged that laid the foundation for MidTown to become a truly competitive metropolitan location for existing and new businesses.
  3. Market the location and other assets To make MidTown competitive, the organization adopted a marketing strategy to change the public’s perception of the area. MidTown’s 3-part marketing strategy included: public relations, communications, and community building to publicize the area’s strengths, promote the area to targeted markets, sponsor events to enhance community cohesion, celebrate accomplishments, and keep the membership and community well-informed. information and marketing services through an in-house Marketing Information Center, which responded to requests for information on space, buildings, and land–this proved to MidTown’s most effective marketing tool for attracting new investment. a range of financial resources and technical assistance–including government loans and grants–to broker and package deals to help MidTown companies that were considering a move to the suburbs stay in the neighborhood.

    Develop a targeted job creation strategy Community capitalism asserts that businesses need to be involved at all stages of local employment programs, so that businesses’ needs are met and people obtain good jobs. It also insists that the economic revitalization of commercial industrial areas should be used to benefit nearby impoverished areas. Since 1986, MidTown’s employers have provided a critical link between residents and jobs through a Job Match Program. At times this has been a challenge: as the Job Match Program shifted, under the Empowerment Zone program, from fitting the needs of employers to meeting the needs of the chronically unemployed, participation by small businesses dropped.

Impact of MidTown’s Efforts on the Community

Between 1983 and 1997, MidTown’s revitalization strategies have resulted in the following measurable successes in the community:

  1. An increase in assessed values in commercial (55%) and industrial (47%) real estate that far exceeds that of the City of Cleveland, Cuyahoga County and the Greater Cleveland Suburban Counties.
  2. A rise in reinvestment activity that resulted in:
    • $500 million fueled primarily by private sector financing.
    • 425 new companies, ranging from 2 to 100 employees.
    • 400 expansion, renovation, new construction or improvement projects.
    • 6,000 jobs retained due to expansion, substantial capital investment, and/or relocation of existing companies within MidTown.
    • 5,500 new jobs gained from expansion and/or relocation.

Lessons from MidTown Cleveland: Improving Policies to Better Support Inner-city Competitiveness Strategies

MidTown’s experience provides important lessons for policy makers and funders in their efforts to aid nonprofit development corporations in rebuilding central city economies. These lessons are also valuable to other nonprofit intermediaries and business-led initiatives as they begin to devise and implement inner-city competitiveness strategies.

  1. The private sector can mobilize its economic power to increase the competitive advantage of inner cities. It cannot do the job alone or by working as individual businesses. The MidTown experience shows that a continuing long-term working partnership between the private sector, the local development organization, and government is required.
  2. The private sector can help shape a competitive market environment by changing both the perception and reality of safety. This requires building long-term partnerships with local police and breaking up or preventing the concentration of social services in the central city, since it is an enormous constraint on competitiveness.
  3. To be competitive, central business areas must be safe, clean, green, and outfitted with updated infrastructure. MidTown gave business owners technical assistance and incentives to enhance their sites and buildings, and established design standards and a Business Improvement District. But to help level the playing field with suburban sites, there must be fairer allocations of funds for roads and streetscape improvements.
  4. Competitiveness strategies must include consistent, sophisticated public relations and marketing programs to promote the advantages and products of an inner-city location. Without the renewed image, the updated data base, the current listings, and the brokering of financial resources and community building activities, business owners will not choose the inner city on their own.

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