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Analysis of Michigan Local Economic Development Policy to Promote Aging City Revitalization

Project Director

Roger Hamlin, Ph.D., hamlin@msu.edu, MSU Professor of Urban Planning

Overview

Metropolitan development in the US since the 1960's has been characterized by ever-increasing suburban sprawl accompanied by central city decline. This continuing trend produces problematic physical, environmental, economic, fiscal, social and political consequences for urban life. These consequences have been well documented in the research literature.

Little political concern has focused on the decline of aging inner cities in the last two decades. Central cities have lost their political influence, as the nation's dominant voting block has moved to suburbia and to newer areas in the west.

The problems of suburban sprawl did reach the political consciousness of middle-class Americans during the 1990s, as some suburban areas have begun experiencing many of the same ills previously limited to central cities. Very recently, a growing political alliance has developed between those concerned with inner city problems and those concerned with metropolitan sprawl. This alliance has emanated from the increasing national recognition that sprawl problems will not be addressed without concomitant inner-city revitalization. Many feel that inner cities have emptied out so much that they contain great potential for in-fill development. However, businesses have been reluctant to return to central cities.

How does a state like Michigan stabilize inner-city economics, redirect development back to the central city, and improve the lives of inner-city residents? Many approaches have been tried since the 1960s, with little success.

Promoting private development in the central city is problematic. Big industrial corporations prefer large expanses of land for new factory development, something difficult to find in aging urban communities. Even when downtown office building construction occurs, those offices do not often provide employment at the skill-level needed by central city residents. And, a multitude of other issues work against urban revitalization. These include aging infrastructure, environmental contamination, social disorganization, traffic congestion, and declining educational systems, to name a few.

Small business development is also important to the nation and state for other reasons. Large businesses produce very few net new jobs. New jobs, new innovation, and the employment of underemployed talent are overwhelmingly the product of small businesses.

Problem

If inner-city development is key to improvement of the entire urban region, and if small business development is crucial to inner-city revitalization, innovation and economic diversification, then what is the status of inner-city economic development in Michigan? More specifically, is Michigan's policy toward promotion of small business development adequate, and beneficial to inner-city economic development? In what areas can state policy improve?

The state already engages in a variety of economic development programs. The Michigan Economic Development Corporation (MEDC) administers several activities to promote statewide economic development. They assist companies to locate in the state. They provide a land availability data bank, labor market information, employee training; export assistance, procurement assistance, and some business finance. But these activities are primarily focused on larger companies. The small companies that are able to use Michigan's programs are usually older, established companies and/or technology-based firms.

Few activities are targeted to the kinds of companies that could assist inner-city areas. Some people argue that some of the state's economic development activities actually cause sprawl, taking jobs and development away from the older areas and inducing them to move to greenfields.

Project Goals

To answer the questions raised above, this study assesses the state of Michigan's approach to the promotion of small business development, particularly of the kind that can benefit declining, aging cities. Objectives of the study include the following:

• Look at current state economic development programs and determine if they adequately benefit small business development.

• Determine the effect of these programs on older cities.

• Investigate the state's ability to target some of the programs to central cities.

• Document innovative approaches taken by other states both to promote business development and to target aging inner cities.

• Investigate Michigan's approach to business incubation. Business incubation focuses on start-up businesses and includes providing training to potential small businesses, assisting in finding start-up financing, offering low-cost space and other services.

An important consideration of this investigation is cost to the public. The state will not spend large sums on inner city revitalization. What will be sought are low-cost ways to induce private economic activity including using the state's authority and/or enabling localities to undertake new initiatives that benefit central city business development while promoting the goals of the community.

Activities

Project activities include:

• Completing a thorough compilation of economic development and small business development tools that are used in other states.

• Assessing how other states are dealing with economic problems of inner cities.

• Interviewing economic development professionals in Michigan to assess the impact of Michigan's array of economic development tools.

• Surveying the general public through SOSS to understand the public's understanding of urban problems and the importance of inner-city and small business development to overall urban quality of life.

Timeline

The project will be completed by spring 2002