- Introduction:
- Brian Bernardoni - Senior Director of Governmental Affairs and Public Policy, Chicago Association of REALTORS®
- Opening Speaker:
- Ameya Pawar – City of Chicago Alderman (47th Ward)
- Panelists:
- Myer Blank – Senior Manager, True Partners Consulting
- Joseph Williams – Co-Chairman, Granite Companies
- Scott Freres – Principal/Co-Founder, the Lakota Group
- Moderator:
- Dr. Joe Schwieterman – Director, DePaul University’s Chaddick Institute
Bernardoni began by imparting to the audience stories about his family’s multi-generational experience living in the City – members of his family told him about the days when mail was delivered twice daily, there were both morning and afternoon newspapers, and the City’s population was over three million inhabitants.
Bernardoni observed municipal boundaries don’t shrink, nor does basic municipal governmental service provision. What does shrink is the number of jobs, employment opportunities, productivity, tax revenue bases, and population. All those components must be tracked and monitored by a variety of public-sector, private-sector, and non-profit agencies to chart the on-going health of a metropolitan area. He cited C.A.R.’s Revitalizing Our Neighborhoods initiative several years ago as an example of benchmarking the economic and residential vitality of individual City neighborhoods and suburban communities in the Association’s service area. Bernardoni pointed to that initiative as a successful mechanism to identify issues like unemployment, foreclosure, and economic disinvestment and their implications on the City’s quality of life.
Bernardoni stated the impacts identified by the Revitalizing Our Neighborhoods initiative allowed C.A.R. to formulate questions about urban public policy and strategies to combat urban decay, questions like:
- How would the City of Chicago continue to pay for what it is obligated to maintain?
- What would a reduction in the City’s various tax revenue bases mean for governmental service delivery?
- What tax revenue streams were logical, predictable and collectable?
- As residential property value decreased due to collapse of the market, where was the tax shift going and what was the elasticity of those who carried a greater property tax burden?
- And while the City’s pension obligations are front and center, how would declining tax revenues mean for the future of public transportation, public education, public safety and public services in Chicago?
Bernardoni noted that the City’s assets cannot be ignored – its location nationally, its proximity to Lake Michigan, its economic diversity, recent positive immigration numbers, and its ability to attract highly educated and trained employees – but wondered if those assets offset the problems of a shrinking city. He posed the question: how can real estate practitioners be part of the solution? This, he added, is the origin of the seminar, in which a “boots on the ground” discussion can take place rather than strictly an academic exercise.
Bernardoni cited the Journal of the Amercian Planning Association’s definition of a shrinking city as “a special subset of older industrial cities with significant and sustained population loss and increasing levels of vacant and abandoned properties including blighted residential commercial and industrial buildings.”
He added that a loss in population results in a high residential and commercial vacancy rate in a city, causing lost revenue for the property owner, a less attractive space, and further vacancies. He listed population loss since 1950 in major American cities, including Chicago’s 20% decline.
Bernardoni offered several thought questions:
- Can Chicago be considered a “global city?” Is it instead a “turn-around city”?
- Should Chicagoans be alarmed?
- Are there Chicago neighborhoods too far-gone to be saved? If so, what do we do about them?
- Can an entire city or parts of it be shut down? Should governmental service provision in the entirety of a city or some of its neighborhoods be discontinued?
- Is boosterism for Chicago as a global city overstated?
- What path is Chicago on as a city?
- Can Chicago grow again or should its residents make better what remains?
- What should a real estate practitioner make of Chicago’s current situation?
Alderman Pawar represents portions of the Ravenswood, Lincoln Square, and Lakeview neighborhoods. He said there are a host of social and public policy implications for shrinking cities, including public education and infrastructure improvements. He said municipal governmental service provision, such as education, needs to drive urban economic development in central cities and inner-ring suburbs, rather than pursuing economic development merely for the sake of economic development.
The alderman described the dynamics involving young couples and new families moving into his ward. He said young couples move into the neighborhood for the good public elementary schools, but leave for the suburbs if their child doesn’t test well enough to enter one of the CPS’ dozen superior high schools. Alderman Pawar raised those dynamics to make his case that the City should be planning for increasing service provision, not figuring out how to reduce services.
The alderman reminded the audience true housing affordability takes into account both housing costs and transportation costs. He stated it makes sense to combat the shrinking city syndrome by encouraging residential redevelopment of vacant and low-density areas in Chicago, which would ensure real housing affordability.
In response to a question from an audience member, Alderman Pawar said the aldermanic prerogative regarding zoning and land use control in each City ward has its pros and cons. On one hand, he said, most aldermen understand the specific development dynamics in his/her ward better than the City Council as a whole, which allows them to make better decisions about allowing land use entitlements. However, he admitted some rezonings, variances, or planned development grants in individual wards negatively affect the City as a whole.
Schwieterman said he’s not yet ready to call Chicago a “shrinking city.” He presented a brief overview of three metro areas that fit that description: Detroit, Youngstown, and Gary. He said Youngstown’s leadership believes its best antidote to its decline is re-creating population density via relocating residents to neighborhoods with sustainable infrastructure.
Blank presented data, such as declining taxable property value, increasing tax rates, and declining TIF increment generation, to connect Chicago’s recent economic downturn with potential effects on municipal governmental service provision. He wondered aloud how the City and suburban Cook County governments can finance future growth, attract businesses to invest, and protect and expand manufacturing and industrial development with the current dichotomy of high property tax rates and low taxable property values. Blank said suburban communities increasing property tax rates prevents commercial real estate investment and business attraction.
Blank then presented a list of future possible remedies available to the City and suburban communities:
- A turnaround in the Chicago metro housing market – currently, according to the Case-Shiller index, Chicago is one of the weakest residential markets in the country
- An increase of high-tech manufacturing facilities and companies in Chicago and suburban Cook counties – to ensure that, vocational technical education should create job skill sets that address the high-tech sector (for example, Blank referred to automobiles as “rolling computers” and stated there’s a lack of mechanics with high tech skills to fill vacancies at auto dealerships in the Chicago area)
- Offering new incentives for commercial redevelopment – as an example, some Cook County suburbs are exploring setting a cap on the amount of municipal property taxes a new or rehabbed facility would be assessed, so that property owners and businesses have some ability to predict their tax amounts annually (a concern is that, currently, under Illinois state statute, only home-rule municipalities can set such a cap)
- Infrastructure reuse/rehabilitation – how can the City and suburban communities upgrade and update their infrastructure as to support creative adaptive reuses of existing industrial facilities?
Blank then addressed some questions from the audience. He said TIF revenue bond covenants would prevent the City “sunsetting” some of the TIF districts, which could be a way to increase revenue to the City’s general funds to pay for service provision. He said most of the City’s tax revenue is dedicated to employee pensions and other long-term obligations, so addressing the City’s deficit isn’t as simple as scaling back on service provision. He identified massive shifts in taxable value as a major cause of a shrinking city.
Next, Williams offered insights on whether the components of a shrinking city are present on the City’s South and West Sides. He said population on the North and South Sides (north of North Avenue and south of Cermak Road) have increased since 2010, while the West Side has continued to lose population. He noted the large amount of vacant land south of Cermak for redevelopment, and projected a 2%-3% annual property tax revenue increase on the South Side for the next two decades. Williams outlined the transportation, redevelopment, and employment drivers on the South Side, including public transit projects, large-scale residential redevelopment, employers like University of Chicago and McCormick Place, and projects like the 600-acre US Steel site redevelopment and the new film studio project on the West Side.
Williams said, in order for Chicago to continue to be a global city, it must focus on the South and West Sides for redevelopment, employment, and reinvestment.
Freres said that he preferred the term “community in transition,” rather than “shrinking city,” when describing a city facing many of the challenges described by the preceding speakers. He added that, as planners look at solutions to those challenges, “transition” better defines the community, especially as it strategizes how to address those problems.
Freres outlined the common factors communities in transition possess:
- Population loss
- Major demographic pattern swings
- Chronic or acute decline
- Decreasing revenue and resources
- High poverty and crime rates
- Population concentrated in poor neighborhoods transitioning to stable
Freres then listed the typologies of communities in transition
- Older industrial cities
- Cities with shrinking populations, development, and economies
- Fast growing boom/bust towns
- Declining first-tier suburbs
- Small-but-growing gateway cities/communities
Freres said communities facing transition are a net result of bad decisions and unfocused leadership. He added he recommends to developers looking for “best deals” communities or neighborhoods where the leadership is strongest and focused. Freres recommended the City of Chicago needs regional leadership, not just local leadership.
Freres presented several “best practices” of communities addressing transition:
- Chicago's Six Corners neighborhood (an urban gateway district that wants to grow but can’t get a foothold)
- Justice (declining first-tier bedroom suburb with no clear vision or land use/revenue-based approach)
- Highland Park (a shrinking downtown business district and recreation areas)
- Kenosha (an older industrial city)
He presented “realistically achievable” solutions:
Friday, June 14, 2013 at 10:15AM