August 28, 2014

Equitable Development: Advancing

Opportunity Through Stronger Local Economies

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Eileen DivringiCommunity Development Research Analyst

Federal Reserve Bank of Philadelphia

Small Legacy Cities, Equity, and a Changing

Economy

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The views expressed here are those of the presenters and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

Legal Notices and Disclaimer

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• Project Background• Building an Equitable Development

Framework• Case Study: Lancaster• Concluding Thoughts

Overview

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SECTION TITLEProject Background

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In Philadelphia’s Shadow

“Rebounding” Cities

Lancaster Bethlehem Wilmington

Report by visiting scholar Alan Mallach in May 2012

Creative Placemaking

Casino & Entertainment

Riverfront Development

Photo credits, from left: Federal Reserve Bank of Philadelphia, Ellie Devyatkin, Ryan Debold, and Kevin Hunter

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What Is Equity?

EQUITABLE DEVELOPMENT refers to a set of processes and outcomes that advances opportunities, choices, and access for all citizens with particular regard for disadvantaged groups and individuals.

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What Is Equity?Decent, affordable housing

High-quality, culturally appropriate education

Accessible health care, healthy foods, recreational opportunities, and a healthy environment

Diverse and practical transportation options

Safe, living-wage employment

Meaningful opportunities for participation in civic life

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Why Is Equity Important?• Relative income equality has a strong correlation with more sustained

economic growth spells in developing countries (Berg and Ostry 2011)

• Relative income equality — along with low political fragmentation and residential integration — is associated with longer employment growth spells in the 184 largest U.S. metros (Benner and Pastor 2013)

• A review of research suggests that income inequality is associated with diminished human capital development and reduced demand stability and may be less conducive to entrepreneurship (Boushey and Hersh 2012)

• Income inequality may be a driver of unsustainable household debt accumulation and an impediment to economic recovery (Cynamon and Fazzari 2014)

• A recently released report by Standard & Poor’s identifies “extreme income inequality as a drag on long-run economic growth,” prompting it to decrease its 10-year U.S. growth forecast (Maguire 2014)Sources: Andrew G. Berg and Jonathan D. Ostry (2011), “Inequality and Unsustainable Growth: Two Sides of the Same Coin,” IMF Staff Discussion Note;

Chris Benner and Manuel Pastor (2013), “Buddy, Can You Spare Some Time? Social Inclusion and Sustained Prosperity in America’s Metropolitan Regions.” Building Resilient Regions Working Paper; Heather Boushey and Adam S. Hersh (2012), “The American Middle Class, Income Inequality, and the Strength of Our Economy” Center for American Progress. Barry Z. Cynamon and Steven M. Fazzari, (2014), “Inequality, the Great Recession, and Slow Recovery,” Social Science Research Network Working Paper; Joe Maguire (2014), “Economic Research: How Income Inequality Is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide,” Standard & Poor’s Global Credit Portal.

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Relationship to Economic DevelopmentEconomic development is a key vehicle for achieving equitable outcomes in legacy cities.

Economic growth

Opportunities for LMI

households

• Economic growth is critical for creating opportunities and improving quality of life.

• Connecting the benefits of economic growth to underserved communities creates conditions that improve the strength and resilience of local economies.

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SECTION TITLEBuilding an Equitable Development Framework

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Methodology

PHASE I:ASSESS STATE OF EQUITY

PHASE II:BUILD & IMPLEMENT THEORY OF CHANGE

PHASE III:MONITOR & REASSESS

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Phase I: Assess State of Equity

PHASE I:ASSESS STATE OF EQUITY

Define Equity• Stakeholder interviews• Literature and precedent

reviews

Evaluate Current Conditions• Develop equity indicators• Document barriers to LMI

opportunity

Identify Desired Outcomes• Define ideal state of equity

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Phase II: Develop Theory of Change

• Working backward from the desired outcomes identified in Phase I, identify the conditions that would produce these outcomes.

• Create a list of concrete interventions that would create these conditions.

• Prioritize interventions based on local capacity and implement those with the greatest impact potential.

Interventions

Conditions Outcomes

Free mobile health screenings

Ensure access to affordable health care

A healthy, active city

Development

Implementation

Prio

ritizatio

n

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Phase III: Monitor and Reassess

PHASE I:Long term• Repeat process

as societal norms & community dynamics shift

PHASE II:Short term• Refine

strategies as needed

PHASE III:MONITOR & REASSESS

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SECTION TITLE

Case Study: Lancaster

Adapted from “Small Legacy Cities, Equity, and a Changing Economy.” Presented at the Reinventing Older Communities Conference in Philadelphia, PA, on May 12, 2014.

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Context: History

• 1700s–Mid 1800s: Establishment as a center for agricultural commerce• Mid-1800s–Mid-1900s: Growth and peak of the city’s industrial economy• Late 1900s: Decline of manufacturing, dramatic population shifts• 2000–Present: Emergence of a thriving local arts community

Photo credit: Ellie Devyatkin

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Context: Demographics

Source: U.S. Census Bureau, 2008–2012 American Community Survey 5-Year Estimates, Table DP05 “ACS Demographic and Housing Estimates,” adapted from Figure 4.05 “Poverty and Ethnicity.” Small Legacy Cities, Equity, and a Changing Economy Studio Work. Self-published, February 2014

1 Dot= 20 People

Hispanic or Latino

White

Black/African AmericanAsian

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Context: Poverty

Source: U.S. Census Bureau, 2008–2012 American Community Survey 5-Year Estimates, Table DP03 “Selected Economic Characteristics,” adapted from Figure 4.05 “Poverty and Ethnicity.” Small Legacy Cities, Equity, and a Changing Economy Studio Work. Self-published, February 2014

0% - 15%

<15% - 30%

<15% - 30%

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Analysis of Creative Placemaking

Revitalize Downtown

Institutionalize Arts in

Lancaster’s Identity

Goals

Key Actors• The City of Lancaster• Lancaster County Community

Foundation• Pennsylvania College of Art & Design • Various private developers

Image credit: LancasterARTS Press Kit

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Analysis of Creative PlacemakingSuccesses• Decreased downtown vacancies• Increase in tourism and visitor

spending• Improved image in region• Potential to attract additional

private investment

Challenges• Limited opportunities for

midskill/midwage job creation• Benefits largely disconnected

from communities south of King Street

Photo credit: LancasterARTS Press Kit

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Analysis of Creative Placemaking

Health

car

e an

d so

cial

ass

istan

ce

Educ

atio

nal s

ervice

s

Other

serv

ices

Tran

spor

tatio

n & w

areh

ousin

g

Accom

mod

atio

n & fo

od se

rvices

Prof

essio

nal, sc

ient

ific & te

chni

cal s

ervice

s

Arts, e

nter

tain

men

t & re

crea

tion

0

1,000

2,000

3,000

4,000

Net Job Growth by Industry in Lancaster Zip Codes,

2000-2011

Source: U.S. Census Bureau County Business Patterns ZIP Code Business Patterns 2000 and 2011. This chart only includes industries that added 500+ jobs over this time period.

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Phase I: State of Equity

Growing housing cost burden driven by inadequate income levels

Deep disparities in educational and human capital development opportunities

Increasing occupational bifurcation that leaves only low-wage employment accessible to underserved residents

Summary

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Phase I: State of Equity

Less than High School

High School or Equivalent

Some College Bachelor’s Degree or Higher

32%

39%

20%

10%

High-growth ** industries accessible at this level:

Educational attainment of adults 25+ in high-poverty* tracts:

Accommodations & Food Service

Other Services

Transportation & Warehousing

Educational Services

Health Care & Social Assistance

* “high poverty”: tracts where >25% of the population 18–64 is classified as living in poverty; ** “high growth”: industries in which net job growth >1,000 between 2000 and 2011Sources: U.S. Census Bureau, 2008—2012 American Community Survey 5-Year Estimates, Table S1501 “Educational Attainment”; County Business Patterns ZIP Code Business Patterns 2000 & 2011

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Phase I: State of Equity

57%

of renter households are cost burdened.

33%

of owner-occupied households are cost burdened.

Median gross rent per month: $733Percent of Lancaster County Median: 85%

Median home value: $102,600Percent of Lancaster County Median: 54%

Source: U.S. Census Bureau, 2008—2012 American Community Survey 5-Year Estimates, Table DP04 “Selected Housing Characteristics”

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Phase II: Theory of ChangeSelected Interventions Recommended by Students Interventions

Conditions Outcomes

• Living Wage Ordinance Ensure Job Quality In

Growing Sectors Economic Security & Opportunity

• Integrated Job Training & Placement

• Local Contracting

Connect LMI Residents to High-Quality Jobs

• TA for Cooperative/ESOP Conversions

Expand Wealth-Building Opportunities

Alleviate Housing Cost Burden

Ensure All Residents Benefit From Economic

Growth

• Shared-Equity Mortgage Program

• Renter Tax Credit

• Community Benefits Standards

• State-level Performance Requirements

Stable & Supportive Quality of LifeProgressive & Inclusive Community Leadership

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Phase II: Theory of ChangeStrategies for Implementation Identified by Students

Policy

• Living Wage Ordinance• Set living wage floor* for jobs created

through public subsidy• Local Contracting

• Select local vendor if bid is within X% of the lowest overall bid

Program

• Shared-Equity Mortgages• Set aside from existing homeownership

funds, administered in partnership with experienced CDFI

Leadership• Integrated Job Placement/Training

• Convene service providers & workforce development entities

* The living wage estimate for a single adult in Lancaster County is $8.11/hr. according to the Living Wage Calculator, available at http://livingwage.mit.edu/places/4207141216

SECTION TITLEConcluding Thoughts

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Success FactorsPublic Leadership• Institutionalizes equity as an economic development

priority

Capacity for Collaboration• Enables communities to develop multifaceted

responses to equity challenges

Empowered Civic Organizations• Provides representation for underserved communities

in public decision making

Diversified Strategies• Creates potential for a continuum of economic

opportunities

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Ongoing ChallengesLimited Public Resources• How can small, financially challenged municipalities

sustain community and economic development efforts?

Local Capacity Constraints• How can cities repair the local economic infrastructure

that enables LMI communities to tap into economic growth?

Scale• How can communities address political and economic

issues that transcend municipal boundaries?

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Key Takeaways

Equity has to be an integrated and intentional part of economic development.

Big economic development projects do not necessarily translate into big benefits for LMI communities.

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William Generett Jr., J.D. President and CEOUrban Innovation21

Urban Innovation21:Equitable Community

TransformationConnecting residents from our region’s poorest communities to our region’s economic prosperity.

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Allegheny County Department of Economic Development Carlow UniversityCommunity College of Allegheny CountyDuquesne UniversityHeinz EndowmentsHill House Economic Development CorporationIdea FoundryInnovation WorksPA Department of Community and Economic Development PNC BankPoint Park UniversityReed Smith Richard King Mellon FoundationUPMC Health PlanUrban Redevelopment Authority of Pittsburgh

Urban Innovation21: Public and Private Partners

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• Urban Innovation21 is a Pittsburgh-based public-private partnership that is working to make sure all communities are connected to our region’s economic transformation.

• As low and moderate income communities transform, we help residents from those communities create and connect successful entrepreneurial enterprise to that transformation.

Urban Innovation21: Background Information

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Aerial View Oakland, Hill District and Downtown showing little economic activity in the Hill District - 2007

Community Transformation

Through Cluster-Based Entrepreneurship

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Community Transformation

Through Cluster-Based Entrepreneurship

• Jobs are created• Existing commercial properties are filled, adding vitality to the

area• New construction is built, adding to the vitality of the area• A positive economic ecosystem is built • Wealth is created for business owners• Residents of the community have a better quality of life• Crime is significantly reduced • Neighborhood commercial corridors are cleaned up • Youth and others see positive role models and the culture of

community changes

From “The Geography of Innovation: The Federal Government and the Growth of Regional Innovation Clusters.” Jonathan Sallet, Ed Paisley, and Justin Masterman September 2009

If a “cluster” of high growth entrepreneurs move to, start and/or grow successful businesses in a community the following will happen:

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Goal Theory Model

Pittsburgh Central Keystone Innovation Zone (PCKIZ) Incentives since 2007:

KIZ Tax Credit Program

•$4M in direct cash assistance

PCKIZ Grant Program

•$412,000 in early stage grant funding to 22 PCKIZ companies

Internship Program

•188 PCKIZ internships at total cost of $334,000•396 total paid internships (60% women, 40% underrepresented minorities

Community Based Economic

Development

•Raised over $4M in direct funding for Hill District Based Economic Development organizations

PCKIZ Consortium

•Community partnerships to provide leadership & help coordinate economic development activities

Incentives to Connect Underserved Community to Region’s Prosperity

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Significant transformation that has occurred in the Greater Hill District since 2007 :• 20 high growth companies have started up, relocated and are growing

in the community• Neighborhood image has changed for the better (i.e. business

development and economic development can successfully occur)• StartUptown (region’s first co-working space in an underserved

community) opened, spurring additional investment in Uptown• Catalytic housing development throughout the Hill District and Uptown• Duquesne University Pharmacy • YMCA• Grocery store• Energy Innovation Center• Hundreds of millions of dollars of economic development slated to

occur in the next 10 years

Community Transformation

Through Cluster-Based Entrepreneurship

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Community Transformation

Through Cluster-Based Entrepreneurship

• Grants

• Direct technical assistance

• Connection to high quality technical assistance

• Connection with low-cost loans, no-cost loans and non-predatory loans

• Connection with business opportunities that can lead to contracts

Urban Innovation21 provides the following services to designated community-based entrepreneurs:

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CULTIVATE a pipeline of businesses via competitions and

workshops

FUND winning businesses and

businesses showing promise from

workshops

SUPPORT businesses with wrap around

services to minimize start up operating

expense

INCENTIVIZE complimentary

businesses to locate in Community

MONITOR and hold businesses

accountable for metrics and pro

forma commitments

MARKET AND ADVOCATE for

local businesses

Community-Based Entrepreneurs Create Successful EnterpriseOur logic model for disciplined business creation:

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Barbara Strothers, Owner of Grace Security, LLC

Photo Credit: Michael Henninger/Post-Gazette

Grace Security, LLC: Example of a Successful Entrepreneur

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Grace Security, LLC: Example of a Successful Entrepreneur

• Business started by security guard and Hill District resident.

• Thought she could never make more than $10 per hour.

• Grossed $150,000 in first year of business.

• Business has received contracts from local anchors including the neighborhood’s largest social service organization and the new grocery store.

Grace Security, LLC Highlights:

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Reed Smith Partnership: Example of Successful Wrap-Around ServicesUrban Innovation21 has entered into a partnership with the law firm Reed Smith.

• Reed Smith is one of the country’s largest and most prestigious law firms.

• If an entrepreneur meets the following criteria, the entrepreneur will become a client of Reed Smith and Reed Smith will do all of their legal work free of charge: o Entrepreneur is from a low income community,o Entrepreneur can’t afford to pay legal fees, o Business is located in underserved community or

benefits people in underserved community.

• To date Reed Smith had provided approximately $200,000 in pro bono legal services to 20 businesses owned by residents from underserved communities.

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• Urban Innovation21 works with hundreds of community based entrepreneurs each year.

• Through its community based grant competitions Urban Innovation21 screens and provides approximately 30 of the most promising community based businesses with wrap around services.

• Successful Entrepreneurs are connected with contracts

with small and large anchors.

Community Transformation GoalGoal: Create a cluster of successful businesses owned by residents of underserved communities that are connected and profiting from our region’s prosperity.

Thank You

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Eileen Divringi, Community Development Research Analyst, Federal Reserve Bank of Philadelphia

Email: eileen.divringi@phil.frb.org Website: https://www.philadelphiafed.org/community-development/

William Generett, President and CEO, Urban Innovation21

Email: wgenerett21@urbaninnovation21.orgWebsite: http://www.urbaninnovation21.org/