prosper as a metropolitan area or it is going to decline as a metropolitan area.” The State of Oregon's dependence on a wood products economy has caused the Portland area to suffer from a recession that slowed homebuilding and related industries, even though lumber and wood products constitute only 8 percent of the city’s manufacturing base. In addition, the state’s failure to enact tax reform and its cuts in higher education have also contributed to an ebbing of the tide of progressive optimism that marked the “Ecotopian years.” Beyond all that, however, Portland has shared the problems that changing conditions brought to all American cities: a deteriorating infrastructure (those essen- It is their emphasis on a sense of place over the unhindered mobility of capital that stands behind St. Paul’s commitment to retain as much economic value as possible within the city’s borders. economic spin-off effect and thus creates more jobs both directly and indirectly, as well as greater municipal revenues. Interestingly, the PDC has no established process for assessing the net benefits to the city of their projects; there is no standard criterion, like the number of jobs produced, on which to evaluate the success or failure of the industrial assistance the city provides. Another facet of the traditional approach to economic development is annexation of unincorporated areas to the city. Despite East County opposition, the largest annexations in the history of Portland occurred in the past year, and other large annexations are in the planning stages. One of those annexed parcels, to the area. A few other cities, however, have responded to changing economic conditions and the decrease in federal aid by seeking innovative alternatives that emphasize a new role for the city and a new goal for development: local self-reliance. St. Paul’s Homegrown Economy: “The self-reliant city views itself as a nation.’’ Zn many ways similar to Portland in its size, past dependence on Eastern capital, and its former status as a resource colony for outside manufacturers, St. Paul, Minnesota, also faces an economic situation where the prime stimulus for development — federal money — is declining, where the amount of goods imported creates a large outward flow of dollars (cities have trade deficits too), and where plant closures and corporate relocations are a constant threat. Unlike Portland, however, St. Paul is not alone in its region but sits directly across the river from Minneapolis, Minnesota, the site of a disproportionate number of large corporate headquarters and a definite influence on its neighbor's economy. St. Paul has decided to address its situation by using the city’s economic and political authority to “create new entrepreneurial and business development oppormnities which use local resources and Ci^te new local wealth.” Based on evidence that most jobs in cities come from start-up firms and the expansion of existing small businesses rather than from large manufacturers moving in, the City of St. Paul has developed a program to nurture homegrown business. Since they believe that the key to de- velopipg their economy is to retain capital in the local area, St. Paul has set up programs designed to serve businesses that are locally owned, that produce for or use the products of other local tial public services such as transportation, water, sewer, waste disposal, etc.); the “new federalism," which has reduced grants to cities, monies for public works, and aid to individuals; and the increasing mobility of large businesses, making cities with less federal dollars even more vulnerable to the demands of private capital. In the past three years, for example, both Georgia-Pacific Corporation and Evans Products Company have moved their headquarters out of Portland, the Hyster Company closed its local manufacturing plant, and other large employers. have laid off or cut back significant r'Smbers of workers. The metropolitan area’s public transportation system is experiencing ridership declines, revenue shortfalls, and has reduced service; there have been wage freezes on city employees; and although some money has been restored this year, the city's budget has not regained pre-1982 levels, especially in human services. It was therefore not surprising when Mayor Frank Ivancie had a number of billboards erected to proclaim that “Portland Is Open For Business,” and a highly publicized campaign to attract outside industry to Portland was instituted by the mayor and his appointees on the Portland Development Commission, which for the first time was given primary responsibility for setting development policy. This strategy for stimulating economic development is based on the assumption that large corporations are the prime creators of an ever-increasing economic “pie” that over time will have a multiplier effect allowing all citizens to share in the benefits — either directly through jobs created, or indirectly through services funded by tax revenues or other businesses generated by the larger industry. Until recently, this approach has been almost universally accepted as the best way to stimulate prosperity. The dramatic growth of the Sunbelt as a manufacturing ‘area for relocated Northeastern industries, or the Puerto Rican “Bootstrap Program” of the 1950s and 1960s, are examples of the immediate and short-term benefits of this kind of development. When city or state governments try to stimulate the economy in traditional ways, therefore, their strategy is to first discover what might induce a company like the fiber optics manufacturer NEC Corporation of Japan to locate a plant in the area, or a large developer like the Rouse Company of Maryland to build in the city, and then to provide those inducements, whether in the form of sewer and road development, land deals, loan packages, or other instruments available to a city like Portland with its AAA bond rating. While these corporate recruitment efforts funded by the Portland Development Commission draw a lot of media attention and promise big returns for the city, they are actually secondary to the PDC’s program of providing assistance to existing, local industries. To accomplish that goal, they offer site selection information and loan assistance for expansion or relocation. Their emphasis, however, is almost exclusively on industry rather than the myriad other forms of local business, since the Commission believes that, as the basis of our national economy, industry offers the greatest the more than 3.000 acres known as Columbia South Shore, will be made available for industrial development because the city has initiated an $11 million program (with substantial federal assistance) to build sewers and streets on the property. Thus annexations become another tool to produce growth in the city's industrial land base, and hence to promote the development of industry with municipal assistance. Has It Succeeded? Mike Lindberg On Economic Development Commissioner Mike Lindberg worked as both Director of Public Works and latter head of the Office of Planning and Development before being appointed to City Council by Mayor Goldschmidt in 1979. He has since twice been re-elected. Poponents of this traditional approach can cite a number of impressive local projects besides the recent Columbia South Shore development that can be expected to stimulate the area economy: the $130 million Morrison Street Project developed by the Rouse Company; the $80 million South Waterfront Project financed by the Cornerstone Development Company, a subsidiary of Weyerhaeuser; the $80 million PacWest Building, called by Mayor Ivancie “the first Japanese investment of its type in this country”; and the recently announced plans of Japan's NEC Corporation to build a plant in Hillsboro. All but the NEC plant were initiated in the boom years of the 1970s, however, and although the Ivancie administration did move these projects toward completion, the problem now, as Commissioner Lindberg sees it, “is that there is not much of the visionary-type work that was occurring seven or eight years ago.” Commissioner Strachan, another immigrant to Portland during the Ecotopian era and a strong advocate of long-range planning, believes that the strategy of attracting large manufacturers is important in conjunction with a program to help smaller businesses already in the city. What worries her is the kinds of jobs those large industries will produce. “I look at some of the cities in the South that are supposed to be growing apace,” she smiles, “and I’m not sure they aren't running amok. If you look at the kinds of jobs they are producing,” she explains, “and the level of pay, you see that many of those people who are working full time are still at the poverty level.” Based on the concept of an industrial society — an image of our world that is perhaps not suited to current realities — the traditional approach to economic development seeks to replace vanishing federal dollars with large corporate capital investments, and sees the city's role as providing the assistance necessary to encourage local industrial expansion or to recruit new industries and developers Clinton St. Quarterly: Has Portland lagged behind other similar cities in stimulating economic development? Mike Lindberg: Generally, I’d say yes. What you've seen here are some very solid efforts in the area of recruiting new businesses, some already coming to fruition, and some that will come to fruition in the next six months. In terms of local, innovative economic development efforts that involve alternative strategies ... we have done very little. In spite of that, we’ve become much more sophisticated in the last four years in a variety of areas.. .. My own feeling is that all these efforts are valid, legitimate, necessary, and there are some success stories. The unfortunate part is that we focused all of our energy at bringing in new business, and we've ignored the fact that most of the new jobs are created by the expansion of existing business and the start-up of new business. We need a balance in the program, we need to do much more to help existing businesses thrive and prosper and, beyond that, we need to become what I call an “incubator city," the kind of place you’d want to start a new business. Specifically, existing businesses lack accessibility to capital; it's much easier for large business to get loans than it is for small- and medium-sized business, and a lot of small businesses want a loan from $25-$50,000 at a reasonable interest rate. What we re talking about is a greater need to make sure our private financial institutions meet that market and some government intervention. Capital availability is an absolute key and one of the major things that small businesses tell me is an obstacle to their expanding. Second, there isn’t a very close relationship between small- and medium-sized business and the government; many of these businesses feel alienated from the government, they feel that not only is government not doing the sorts of special things that will help them, but that it sets up obstacles that may hurt them. An example would be all the businesses in our neighborhood commercial districts.. . . What you've seen historically is that 99 percent of the city's funds are focused in the downtown area, and that’s important, but there's been a neglecting of these neighborhood commercial districts.... The last area has to do with energy. There are some very simple and do-able energy conservation programs that would be a major asset to our existing businesses. I'm working with the private utilities and the Bonneville Power Administration to offer free energy audits to Portland business. Because we had a federal grant, we were able to work with 500 businesses within the city previously, and on an average they were able to cut their energy consumption by 20 percent. If you could get all the businesses in the city to be more energy efficient, we’ve estimated around $50 million a year increased profitability of existing businesses due to energy efficiency. The next level of programs go beyond that to the things we might do to encourage start-up business. One of the proposals that I sent to the PDC was something out of Connecticut called the New Products Division, where the state basically allocated money and set up a venture capital fund for loans to firms and people who had invented and patented new products. What has happened here is that people with new products took them to other states because they felt it was easier to get capital and that it was a better climate for business. CSQ: Do you think some of these innovative development approaches would be quicker to come on line than more traditional development projects? ML: I'm not saying it takes six to eight years between the time you say, ‘Let’s go out and recruit a business,’ and bringing that business; with NEC Corporation in Washington County, for example, that took only a year and a half. But all these things take a tremendous amount of hard work, and we have to look to the long term. So if the new mayor comes in and we divert some of our energies to these new sorts of economic developments, they'll take several years to produce results. We'd be mistaken if we said, ‘Now if we abandon this recruitment thing and start moving to help existing businesses and start-up businesses, we could do this very quickly.’ I think mistakes are made when the problem or solution is oversimplified, or you look for the quick fix for economic development problems. CSQ: Wouldn't funding be a problem if we continue the recruitment efforts now under way and add a program like the St. Paul effort at local development? ML: The reality is, we haven't pursued these alternative strategies in sufficient detail to know whether they would absorb all the funds that might be available. Second, these programs involve making an investment. I think we ought to go to the State Legislature and say, 'Let's make an investment of $5 million in these alternative strategies.’ I’m convinced that if these are good ideas and if the leadership and a consensus are there, the resources can be found to make these things happen: it isn’t a resource problem ... so it could be done if the commitment is there. Basically, the obstacle is a lack of vision and a lack of commitment. • 6 Clinton St. Quarterly
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