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Daley on Development

Economic Policy: Like Father, Like Son?

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Chicago's neighborhoods have lately become one of the nation's liveliest laboratories of grass-roots economic development. Over the past decade, dozens of nonprofit community groups have worked against great odds to keep factories in Chicago and to stimulate new commercial and industrial activity here.

All across the city, these groups have helped to find appropriate space for growing operations, to organize mutual aid among businesses for physical security, and to recycle abandoned factories for new manufacturing enterprises. They have trained workers, provided technical assistance on everything from quality control to waste disposal, and put together creative financing packages for capital-starved businesses. They have defended manufacturers against encroaching residential and commercial speculators and at the same time have helped to revitalize neighborhood shopping districts.

Beyond strengthening their neighborhoods and local businesses, these underfinanced but persistent groups have influenced politicians' ideas about the ability of local government to shape the city's economy. Especially with Harold Washington's election, they helped shift the city's economic-development efforts away from the priorities of the past--the Loop, real-estate deals, and generating more property tax--toward neighborhoods, manufacturing, and generating good jobs.

So representatives of these groups, some of them working together through CANDO (Chicago Association of Neighborhood Development Organizations) and CWED (Community Workshop on Economic Development), were anxious to meet with this year's mayoral candidates, both to hear the would-be mayors and to express their own views. The first meetings with Alderman Larry Bloom, Alderman Tim Evans, and acting mayor Eugene Sawyer were cordial. All three candidates advocated continuation of Harold Washington's policy of "balanced growth"--that is, supporting the Loop's thriving real-estate and services economy but giving special attention to the vulnerable manufacturing and commercial economy in the neighborhoods that had been neglected under Mayor Richard J. Daley.

But many of these community economic-development experts were stunned by their late January meeting with mayoral aspirant Richard M. Daley. It was "a disaster," "depressing," "a truly horrible meeting," in the words of a few participants. They were shocked that Daley seemed so insensitive, even hostile, to the new wave in economic development.

"I had expected he would be more accommodating to what has become commonly accepted, like the need to keep manufacturing and the idea that development is more than real-estate development," reported one participant who requested anonymity. "He said small manufacturers, if they need to move to the suburbs, let them move. 'I don't want a factory in my neighborhood,' [he said]. Specifically he mentioned that the whole Chicago River should be residential, commercial, retail, that there should be no manufacturing. It was too nice a site." Last year the City Council unanimously approved a planned manufacturing district (PMD) for a stretch of factories along the north branch of the river around Goose Island; the measure protects manufacturing businesses from competitive encroachment by condos, bars, and shops. "Daley didn't come right out and say we were going to do away with that PMD," the above-quoted participant said, "but he was skeptical." Daley repeated that skepticism in a Crain's Chicago Business interview, provoking worries that he might oppose several other pending PMD locations, including two more along the north branch of the river.

Joel Bookman, president of CANDO and executive director of the Lawrence Avenue Development Corporation, and Ted Wysocki, executive director of CANDO, were among several participants who confirmed Daley's indifference at the meeting to manufacturing and the PMD. When the neighborhood developers argued with him that manufacturing was important for the city, "Daley's response was 'Nobody wants to live next to the stockyards,'" Wysocki said. "Daley wasn't concerned about the effect of real-estate speculation on manufacturing."

But people still do live near the stockyards, and some of them work in an industrial park there whose buildings are now fully rented thanks to neighborhood development efforts. In addition, one vacant quadrant of the stockyards park is likely to be developed soon as a result of a clever arrangement made by the Sawyer administration, whereby taxes from a shopping center on one part of the site will be channeled into developing the infrastructure needed for manufacturing in the vacant quadrant.

Such progress is precarious. Last year a developer wanted to change the zoning of some land in the Back of the Yards area from industrial to commercial to build a shopping center. But the zoning change would have put a manufacturer in an adjacent industrial park out of compliance with city codes. The developer had the support of the late Mayor Daley's old planning commissioner, Lew Hill, but 11th Ward neighborhood groups and even Alderman Patrick Huels, a strong supporter of Rich Daley's mayoral aspirations, opposed the rezoning before the Planning Commission, which turned down the request. Ultimately the factory was saved and the shopping center was built at another location in the neighborhood, a win-win outcome for the community. Under Chicago's traditional procedures, which neighborhood developers fear would be resurrected if Rich Daley is elected mayor, neighborhood groups would have been ignored, the new retail development would have been given an unquestioned green light, and jobs would have been lost as a result.

The issue goes beyond whether the city can or should save its remaining quarter-million factory jobs, after losing nearly a third of its manufacturing employment between 1979 and 1986. The emerging "balanced growth" strategists see the primary objective of economic development as the creation of more good-paying, long-term jobs; the old Daley strategy focused on real estate and big construction projects.

The new strategists think the Loop and its service economy will continue to thrive with only modest encouragement; they want to invest more of the city's limited development dollars in the neighborhoods--for example, to renovate the facades of neighborhood shopping strips and make the streets passable for trucks by raising the clearances of old underpasses.

Where the old development strategy looked narrowly at the extra property-tax revenue generated by new office buildings, hotels, or shopping centers, the new strategists point out that a manufacturing job stimulates more related jobs than a service job and pays higher wages, permitting workers to buy homes and more retail goods. (They also favor most downtown real-estate expansion if it is not obtained at the expense of the rest of 'the city's economy. Indeed, Washington even began linking public support of downtown projects to neighborhood improvement, favoring developers who would promise to subsidize such neighborhood needs as affordable housing or, as is now proposed, childcare facilities.)

Of course, the old way had an advantage of sorts: it fit well with Chicago's political traditions. Developers and lawyers made huge sums from their real-estate ventures, and they--like the building-trade unions--were delighted to funnel large campaign contributions to machine politicians to grease the way for zoning changes, permits, and approvals, as well as occasional public subsidies. The preponderance of big developers in the long list of Richard M. Daley's campaign contributors is testimony to their faith that Daley will return to the old ways. He's also received big contributions from conservative building-trade unions and law firms. Many of the latter already have ties to the state's attorney's office, and they may be thinking warm thoughts about Daley's promise to privatize and subcontract many city functions that in recent years have been shifted into the city's legal department.

Tom Carlson, the outgoing executive director of CWED, said that in the meeting with neighborhood economic developers, "Daley indicated little understanding of or interest in anything that crossed over Wacker Drive to the neighborhoods. His understanding of manufacturing is that it"s all going to the suburbs, so why try to retain it? It's silly to try, he said, because of unionization, global pressures, and the facilities and reduced taxes that suburbs offer. He had very little interest in any retention efforts, whether incentives or zoning, most particularly planned manufacturing districts. He said, 'I grew up next to the stockyards, and I don't want to live next to a factory, and nobody does. We're not going to have any more soap factories.' His reaction to planned manufacturing districts was that industry doesn't produce the kind of tax revenue that new commercial and residential developments do, because they're not taxed at the same rate, so why not go with something that funds the city? He didn't seem to have much interest in the character and quality of the jobs."

In the meeting, according to Wim Wiewel, director of the Center for Urban Economic Development at the University of Illinois/Chicago, Daley argued "that the key aspect of economic development is real-estate development and property taxes. That's clearly a departure from the Washington administration, where the key to economic development was jobs. It was very explicit: economic development was real-estate development, which brings in property taxes, and that's what makes the city roll. When somebody brought up the case of Finkl Steel [a firm that was encouraged by the new PMD to make new investments and hire 100 more people], he said, 'Don't you think if we had condos and shopping malls there, wouldn't that generate more property taxes than Finkl Steel?'"

Even if one looks only at tax revenue, Daley may be wrong. Larry Georgeson, program director of the New City YMCA Local Economic and Employment Council, which spearheaded the drive for the Clybourn Avenue PMD, argued that the city would lose tax revenue if the condo-boutique wave drove manufacturers out of the north riverfront area. "There is a popular misconception that economic development is realized through real-estate development," Georgeson said. "It can work to the contrary. In Chicago, a larger percentage of the city's budget comes from the corporate utility tax, the head tax, and other taxes on industry than from residential property taxes. City workers who earn higher wages in the industrial sector are also contributing through the real-estate tax base. When we lose those jobs and industries, while there is some gain from the inflated value of property, there are losses in other parts of the city.

"Firms leave because they feel they have to," Georgeson argued, not because it's inevitable. If the public doesn't support industrial development to the extent that it supports other sectors of the economy, the flight of manufacturing jobs becomes a self-fulfilling prophecy. But even a modest commitment on the part of the city can yield big payoffs. In the Clybourn Avenue PMD, for example, besides the Finkl Steel expansion, Procter and Gamble has made major new investments, and there have been expansions of a fish wholesaler-processor, a nonglare-glass manufacturer, and a scrap-metal processor.

Last week a group of Chicago planners gathered to hear about a series of new PMDs and suburbanstyle industrial parks that are near fruition. Nearly everyone, including Daley, supports industrial parks, but the success of those parks relies in large part on retaining and revitalizing the industry that is already here. Simply providing land for industrial parks is far too passive a strategy. Business "incubators," which have not yet received much city support, can actively assist new businesses in getting started.

The new industrial parks, and the hot market in small and midsize factories, are signs that a Chicago manufacturing strategy makes sense. "In the next 10 to 20 years you're going to see great moves [of manufacturing] back to the central cities," argues Joseph Abel, executive director of the city's quasi-public Economic Development Commission, who until recently directed development for booming Lake County. Abel points out that Chicago has labor, water, and infrastructure, such as public transit, while the suburbs have labor shortages, water shortages, and transportation gridlock. Private planner John LaMotte, who is developing plans for a Pilsen industrial park, believes location close to the Loop can be a big advantage for many light manufacturers, machine-repair firms, and similar businesses, especially if the city can make close-in areas more attractive and easier to negotiate by truck. But to take advantage of these trends, Abel insists, Chicago has to market itself better and retain the industry it already has.

Beyond their fundamental policy differences with Daley, many neighborhood development groups fear that he will greatly cut back reliance on them as "delegate agencies" to implement city projects. Former mayor Jane Byrne first started channeling money to neighborhood economic-development groups, and Washington greatly accelerated it. While Sawyer, Bloom, and Evans all expressed strong commitment to what has been a very effective strategy, Daley was less clear. Several participants in the meeting with Daley were reluctant to talk on the record because they feared reprisals from him if he is elected.

On a related issue, Bloom, Evans, and Sawyer were more willing than Daley to entertain a full range of alternatives to renewal of the Commonwealth Edison franchise next year. All three were also critics of the Edison rate-hike plan (promoted as a rate "freeze") that Daley supported. Since high electric rates are now a major deterrent to manufacturing retention and expansion, willingness to battle Com Ed becomes a key development issue.

The mayoral candidates' positions on retaining and expanding neighborhood-based manufacturing reflect not just their values but also their constituencies. Although many working-class whites still hold city factory jobs, manufacturing disproportionately employs blacks, Hispanics, and Asian immigrants. Some conservative white neighborhoods don't want factories around because they don't want today's factory workers.

When he was a candidate, Bloom argued for easier, low-priced transfer of vacant city land to new businesses; linking city capital spending to economic-development objectives; and plowing repayment of old development loans into new development efforts rather than putting the money into the city's general fund. His comprehensive economic program was by far the best public-policy statement made during the campaign.

Sawyer has continued many Washington initiatives, such as the planned manufacturing districts and development of the new industrial parks. He made a token commitment to spend some of the city's own tax money on economic development, an important departure from past total reliance on federal funds, which are now dwindling. He also made modest progress toward greater recycling, which can ultimately generate jobs as well as save taxes and the environment.

Sawyer's commissioner of economic development, Tim Wright, argues that Daley's dismissal of manufacturing is irresponsible. "We push manufacturing not because it's the end-all or panacea," Wright says, "but it's the area that needs the most help." Although Daley calls for "one-stop shopping" for businesses needing city help or permits, Wright argues that the city already started it under Washington and has improved it since. Like many neighborhood developers, he is skeptical about Daley's plan to combine planning, economic development, and other agencies, which in any case began meeting together as a development subcabinet under Washington. Critics see the Daley plan as a reversion to the old days when Lew Hill ran all development for the late Mayor Daley: big developers were taken care of quickly, but neighborhoods had a hard time being heard. A superagency, says Wiewel of the University of Illinois, "doesn't solve problems of bureaucratic slowdowns. It just centralizes them."

Although Evans hasn't spelled out his program fully, he's an ardent advocate of capital spending to aid local business and neighborhood planning councils to help guide city services. He promotes industrial retention, cooperative pollution-prevention plans, creation of a special loan fund to convert vacant large industrial buildings for use by smaller businesses, and cooperative development of "factories of the future" for key industries (printing, machine tools, food processing, and furniture making, for example). Like all the candidates, he wants to speed issuance of permits to businesses.

Whatever their differences on other issues, on the question of economic planning for the city, Sawyer and Evans (and Bloom) remain somewhat within the Washington mold. "I see Sawyer as basically a watered-down continuation of Washington-administration programs and policies," Tom Carlson says.

George Kalidonis, executive director of the Chicagoland Enterprise Center, a project of the business elite's Commercial Club, also sees Sawyer as holding to the new course, although, he says, "If Larry Bloom had been elected, he would have steered even more toward what most people think Washington would have wanted. Many believe Daley would move to a far different balance of the neighborhood and Loop." Although Kalidonis thinks Daley might not swing the pendulum back as far as others fear, he says, "I don't think he would be much of an advocate of intervention in the market, like the planned manufacturing district. I think he would do away with it right away." But Evans "would conceptually be tied very closely to Larry Bloom's ideas. I think Tim Evans might be more radical, and he's tied more to the neighborhood groups."

The biggest difference is that Washington, followed by Sawyer, Bloom, and Evans, represented a new philosophy of city government's role in the economy, one that even the Commercial Club began to accept: the city has to plan its economic future and take an active role in making that future come to pass.

"The old way of doing things was to let the real-estate development community plan for the future of the city," Georgeson observes, "and there was never any proactive policy of the city to plan for growth until the Washington administration." At least on matters of economic-development policy, the current mayoral campaign presents a clear alternative, a continuation of the new balanced-growth planning or a return to the old days when the real-estate developers bankrolled campaigns and called the shots for the city's economic future.

Art accompanying story in printed newspaper (not available in this archive): illustration/Kurt Mitchell.

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