Economic Development 101

Economic Development 101

Another BDC is Possible. Photo By: Clayton Conn
Another BDC is Possible. Photo By: Clayton Conn

In a city like Baltimore, we see very large differences between what happens in which neighborhoods; these differences are a result of the decisions that get made around urban development. It is crucial to understand how a city’s economy is built, these prioritizations, and how things could be done differently.

 
DEVELOPMENT
 
“Development” is a strange word: it sounds like a natural process. In reality, “development” is anything but natural: policy decisions, from zoning to tax rates to direct public assistance help determine what kind of “development” takes place. “Development” is often treated as automatically a good thing, but we should know better. Some kinds of “development” displace people so that other, wealthier people, can move into the same area. This kind of development is called “gentrification.” Other kinds of development, like those focused on making it easy for big chain stores to be built, can cause small, locally-owned businesses to disappear. Other kinds of development may hurt the natural environment by encouraging the use of cars instead of mass transit. Development is the result of choices made about the kind of city they want to build, and different choices mean different kinds of development. The question is, who gets to make these choices?
 
DEVELOPERS
 
A developer is a person or an organization who has enough money to be able to reshape the urban landscape in a way that they think will benefit them. Wealth and assets translate into the power to rebuild the city the way you want to; although the public does get a say because projects need to be approved (and often financially supported) by the city government, this say often happens at the last minute, and with no alternatives on the table. Most developers are for-profit entities—rich people trying to get richer. There are, however, an increasing number of non-profits engaging in development activities, and a small but growing number of models for public and cooperative development.
 
PLANNERS AND PLANNING
 
Planners are responsible for coming up with an economic vision for the city and its neighborhoods that goes beyond single projects. Those in the city government have a chance to see their ideas made real. Theoretically, development is supposed to follow planning, but often plans are made up to present the goals of private developers as public benefits. In Baltimore, much economic planning has focused around developing a tourism and entertainment industry in the Downtown and Inner Harbor, with city and state support for stadiums, malls, and other attractions. Unlike the industrial jobs they are meant to replace, however, this kind of economic vision offers low-paying service jobs, not meaningful careers.
 
SUBSIDIES
 
As long as benefits for ordinary citizens—like rec centers, affordable mass transit, and functional public schools—have to contend with shrinking budgets, the benefits for developers are in no danger of going away. These benefits include:
 
PILOTs: If a developer claims that a project wouldn’t be financially viable if they had to pay property taxes, a PILOT (“payment in lieu of taxes”) can let them off the hook.
 
TIFs: TIFs (Tax Increment Financing) starts with a developer’s promise that their project will raise property tax revenue in the surrounding area. Then the city agrees to use that increased amount to help the developer’s project. Usually, they do this by earmarking the promised increase to pay the interest on public bonds that will generate the cash that should materialize tomorrow, today. The property tax dollars captured by TIFs don’t support schools or rec centers; they just go to pay off the bond-holders.
 
LOANS AND GRANTS: Below-market interest rates, or even just piles of free money are also used to support development.
 
ENTERPRISE ZONES & TAX CREDITS:
 
Development in certain areas may be eligible for extra breaks on taxes that would normally be owed by a developer.
There’s other kinds of assistance that are offered to developers that don’t revolve strictly around money, but are just as important:
 
LAND-BANKING: The city often does the hard work of buying up and assembling lots of small properties into something big enough for a developer to be interested in. Sometimes eminent domain can enter into this process: the city can legally force one person to sell and vacate their property so they can give it to a developer for their project.
 
SOCIAL COSTS: If workers in a development are paid wages too low to support themselves, if a development causes environmental problems, the city is often left picking up the check for these costs. We say these costs have been “externalized” by the developer, who doesn’t need to worry about it.
 
BDC
 
The Baltimore Development Corporation is technically not part of the city government, although its board is controlled by the Mayor, and nearly all of it’s funding comes from Baltimore City tax dollars. Its mission is to connect private developers with city properties and the kind of city subsidies detailed above.
 
THERE ARE THREE PROBLEMS WITH THE BDC:
 
1) The BDC is not transparent. Many of its decisions are made behind closed doors. In fact, the BDC fought for years to close its operations to public inspection because it argued that as a private non-profit, it was not required, as government agencies are, to hold open meetings.
 
2) The BDC does not make sure that the projects it supports will pay a fair wage, provide adequate benefits, or treat workers with dignity. Rather than pursuing strategies designed to empower the economy at the community level, the BDC helps big developers with big projects, under the flawed assumption that benefits will “trickle down.”
 
3) The BDC is not participatory: ordinary people are not invited to the planning table to collaboratively produce a shared vision for the city they live in; as a consequence, the BDC helps build a city based in outdated—and discredited—visions of what an urban economy should look like.

John is a member of the Red Emma's Bookstore Coffeehouse Collective and is finishing a PhD at the Humanities Center at Johns Hopkins on the history of the idea of self-organization.