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Danny Gardner

Dr. Nicholas Montgomery

ECON490

12 December 2016

Assignment 3 – Newark, NJ

Cities have traditionally established themselves as the end-result of progressive

innovation and societal advancement throughout the course of history. Agglomeration within

cities has allowed for many to evolve into world-class manufacturing juggernauts; capable of

sustaining existing markets, while fostering the potential to introduce emerging ones. Growth

and sustainability however, are not guarantees in the highly evolving technologically driven

world. Many cities rise, fall, and stagnate over time due to everchanging market shocks; but

often have the potential to dictate their future as well. Not far from my hometown of West

Orange, NJ lies the infamous and controversial city of Newark, NJ. Newark by population is the

largest city in New Jersey, housing close to 281,944 people [1]; and only several miles away

from the economic colossus that is New York City. Newark remains one of the most well-

equipped cities for large scale production and supply chain operations through air, ground, rail,

and water; due to its relative proximity to major airports, waterways, and railroads [4]. Despite

these seemingly helpful characteristics, Newark has fallen victim to dilapidated neighborhoods,

high crime rates, lack of business investment, and more; all of which contribute to the gradual

decline in agglomeration and appeal.

Furthermore, one of the most difficult challenges Newark has faced is the discriminatory

housing market. The Brookings Institution produced a report utilizing 2000 Census data to

further analyze the underlying causes of Newark’s inefficient labor and housing markets. One of

the most staggering implications is that many of Newark’s families have single parents as head

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of households. Brookings estimates that the high proportion of single parent households,

combined with marginal loses of married couples and young high-skill professional, has put a

damper on Newark’s ability to maximize its available human capital [6]. Single parent

households bear a greater burden of raising kids compared to that of married couples, as they

accrue greater per capita household income. A large share of Newark’s residents are not college

educated, discouraging labor force participation and the likelihood of large corporations moving

business there [6]. While big companies like Prudential Financial and PSE&G have remained in

Newark for decades, their employees have continuously been sourced from neighboring suburbs;

which are more economically sound and appealing to those joining the labor force full-time.

There are certainly many factors at play such as access to quality education/afterschool

programs, healthy food, etc.; but one of the most critical investments for Newark to make is that

in improved housing.

Picture Provided by Newark Housing Authority (NHA)

We have seen in class the return on investment to both society and individuals

through increased investment in neighborhood revitalization. The Newark Housing Authority

(NHA) in recent years has done just that. Baxter Park for example, is a mixed income housing

community in Newark’s central ward, providing a much-needed affordable housing alternative

since 2013 [7]. These new apartments provide the central ward with newly implemented solar

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panel technology, potentially resulting in higher rent prices, but with the added capacity to run

additional amenities like computer labs, laundromats, etc. Other green features in the building

such as energy efficient appliances and water saving fixtures, are expected to decrease

maintenance costs and generate long-term operation savings [7]. Reducing the costs associated

with maintaining the building can reduce inhabitants rent burden, allowing them to spend money

elsewhere.

The Baxter Park complex offers 90 rental apartments in two, four-story elevator

buildings, connecting the neighboring communities to the central business district a few blocks

away [7]. The business district itself is geared more towards restaurants, as opposed to traditional

central business districts that also incorporate retail. During my time at the NJ Treasury

Department last summer I discovered that one of the biggest tax revenue generators was the sales

and use tax; generated from a 7% tax on certain retail products. The positive trend in sales tax

revenue suggests that purchasing power is increasing, and that more people are willing to spend

money. With a new development like Baxter Park, residents will likely look to the nearby central

business district in search of new consumer hotspots. Additionally, 3,000-square feet of retail

space remains available to lease beneath Baxter Park, allowing for a potential increase in the

city’s tax base. If the NHA can continue to produce new housing developments close to higher

retail potential neighborhoods, the overall quality of life should see a dramatic improvement.

A firm’s decision on where to establish itself is focused primarily on physical location.

Firms want to establish themselves where they have access to in-demand talent, close proximity

to local amenities, and ultimately a plot that they can afford. New Jersey offers a comprehensive

array of business loans, grants and incentives, aimed at drawing in companies and assisting with

relocation fees [5]. These types of incentives can help attract new business, which in Newark has

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come in the form of smaller businesses, relative to former industrial inhabitants. The Grow

Newark Fund for example, acknowledges the overbearing challenges associated with obtaining a

small business loan; providing an alternative means of acquiring the requisite funds necessary for

initial development [5]. Place-based policies also play an important role in the ongoing

revitalization of Newark, as it is designated as an Urban Enterprise Zone UEZ [3]. The UEZ

Program offers participating businesses tax incentives that encourage businesses to locate in that

particular area. One of the more popular tax benefits is the 100% exemption from the State’s

Sales and Use Tax when purchasing tangible personal property, materials and equipment and

services [3]. Exemptions like these will help smaller start-up businesses enter targeted markets

through the subsidization or elimination of associated costs. (Urban Enterprise Zone in Newark

pictured below)

Acquired through Newark ArcGIS and Google Maps

These incentive programs can increase agglomeration within these UEZ zones, thus

increasing Newark’s overall density. Another city-specific study conducted by the Brookings

Institution concluded that urban business density can improve manufacturing productivity [2].

They also found that manufacturers are more productive in locations with a high business density

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[2]. As we learned earlier on in the class, agglomeration can also promote competition; inviting

existing firms’ competitors to move into the same market to compete for capital resources.

Similar firms likely have the capacity and resources to justify a move into a denser area.

Combined with financial and tax incentives, more firms will find it easier to join an existing

market if it has just as good a chance to succeed as a competitor.

Photo by Aaron Houston for The New York Times

Economic Development in cities can be fostered through a variety of channels. Recently,

the City of Newark oversaw the addition of a new sports stadium to house the New Jersey Devils

and serve as a multi-purpose events venue. Located in the middle of the Urban Enterprise Zone,

city officials sought an entire overhaul of the downtown region that lay barren for years (as seen

above). Much of this uninhabited land included surface parking, a few restaurants, along with

abandoned demolition zones. While there have been newer additions to the area, the acres of

land surrounding the Prudential Center left plenty of room for improvement.; as redevelopment

in this area had yet to resuscitate, following the 2008 recession. Newark did not begin

assembling the land until after the arena opened, leaving very few options for pre-game and post-

game entertainment in Newark’s central business district. The city has also yet to acquire

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surrounding properties that could ultimately be used to attract high volume capacity restaurants.

[8]. The Prudential Center aka ‘The Rock’, was financed through a joint venture between

Newark, which contributed $220 million, and the New Jersey Devils, who covered the remainder

[8]. Newark officials seemed to justify their multi-million-dollar investment by promising short

and long-term returns, in legal accordance with participating financiers. The Devils were

expected to pay the city fixed rates of associated revenue streams in the form of suite revenue,

concessions revenue, and gift sales [8]. While several of my high school friends have found jobs

through the existence of the Prudential Center, they have also mentioned countless times that

there is little to no consumer spillover; once the game or event ends everyone gets onto the

nearest highway and heads home. This could be largely caused by the preconceived notion of

Newark being a very unsafe city, which is an entirely different hindrance on its own.

Ultimately, the City of Newark has seen gradual progress in its attempt to revitalize its

most economically appealing wards through a variety of publicly and privately financed

investments. Whether some of these investments will yield positive short and long-term returns

on investment is somewhat uncertain. With successfully proven programs in place, combined

with strong leadership, the City of Newark will continue to aim for economic revitalization.

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Works Cited

[1] U.S. Department of Housing and Urban Development https://portal.hud.gov/hudportal/HUD?src=/states/new_jersey

[2] Nisha Mistry https://www.brookings.edu/research/newarks-manufacturing-competitiveness-findings-and-strategies/

[3] Newark Economic Development Corporation http://www.newarkcedc.org/uez-business-incentives

[4] U.S. Census Bureau http://www.census.gov/quickfacts/table/PST045215/3451000

[5] Brick City Development Corporation http://bcdcnewark.org/

[6] Center on Urban and Metropolitan Policy https://www.brookings.edu/wp-content/uploads/2016/07/newark.pdf

[7] Newark Housing Authority http://www.newarkha.org/LTI_baxterpark.php housing development FEB 2013

[8] Mary Jo Patterson http://www.nytimes.com/2009/02/15/nyregion/new-jersey/15arenanj.html