Dr. Laura Reese, a professor of political science and director of the Global Urban Studies Program at Michigan State University, has spent the last several years studying how cities use economic development tools. Her findings show that traditional economic development practices lead to little to no growth in the well-being of residents. What does work, according to Reese, is broader investment in basic services. Reese, who is working on a book about the findings with a colleague from Wayne State University, spoke with MiBiz regarding how state and local governments can get the most bang for their buck when trying to grow their economies.
What has your research found?
Specifically I’m looking at … what kinds of things improve the economic well-being of the residents in your community — assuming that if they’re better off, then the community is better off. The things that most strongly correlate with improvements in the economy are investments in the local public school districts, either in per-pupil spending or in infrastructure — which is an important finding particularly given what’s going on in Detroit. (Other things include) investments in basic services like police and fire, parks and recreation and investments in your public building infrastructure, such as schools. There’s really not much of any correlation (to economic growth) with any commonly used economic development policy.
What are some of those traditional policies you’re referencing?
It’s tax abatements or DDAs or enterprise zones, industrial parks. Nothing really correlates. There are some correlations in growth when Michigan had the Cool Cities initiative. Cities that used that — and there weren’t a lot — do appear to see some improvement.
Can you explain why that is?
To tie it back directly, you’d have to be able to empirically rule out any other possible thing going on in the community. All I can say is that I observed that cities that (participated in) Cool Cities — along with other investments in the downtown because most of the Cool Cities money was directed at enhancing downtown areas — had some improvements. That was the only economic development policy that seemed to work.
Are there other things about Grand Rapids that stood out in your research?
While generally I would say that tax abatements are not a good way to go because you’re giving away potential tax revenue for companies that might not stay or might not hire local workers, Grand Rapids appears to have used them smarter than a lot of other cities. By that I mean they tend to spread them around more. It’s smaller amounts to more firms rather than putting all your eggs in one basket. Grand Rapids is taking the approach of, ‘Let’s give smaller amounts of help to more firms.’
The Van Andel Arena in downtown Grand Rapids is often touted as the area’s catalyst for growth and has led to other big projects and infill development. How does that fit in with your research?
Generally, a big a project like an arena doesn’t have a lot of spillover benefits. It can if it’s integrated into the local community and you encourage people to go to the events at the arena and then also hang around downtown and do other things. What Grand Rapids has done has kind of ensured that it’s safe for people to do that — that’s the investment in the services. But then there’s other things they can do and go to.
How does that differ from other parts of the state?
In Detroit, it’s harder because of the public safety perception. You get suburbanites going in, doing the stadium or casino, and then leaving. It’s harder for Detroit to get the critical mass of other things going to create a lot of spillover. So the fact that Grand Rapids is a little smaller market has helped, too. I think the lesson in Grand Rapids is: They’re paying attention to a lot of different things that are important. It’s not just an arena, it’s also good public services — the idea that there’s not one silver bullet.
How did you come to write your forthcoming book?
The book is sort of in-progress at Wayne State Press and it’s primarily all of the work we’ve done over 20 or 30 years, primarily on Canadian cities. A lot of the research was funded by a program with the Canadian embassy that encouraged U.S. scholars to do Canadian work. Also included in the book are some comparisons, primarily between Ontario and Michigan. But the book is mostly focused on mid-size cities, so not Toronto and not Ottawa.
What were some of the comparisons you found between Ontario and Michigan?
Provinces are different in how they regulate cities. … In Ontario, for example, the province does not allow local governments to do tax abatements. If they want to do a tax abatement, they have to go to the legislature and make the case. It’s decided at that level.
How does the lack of local tax abatements change the dynamic between cities?
I think that causes cities to be a little bit more creative or entrepreneurial in what they do as far as economic development because (tax abatements) have been taken away. I’ve made the argument that if Michigan did the same thing, it would be good. It would limit competition among cities and have them look at other things.
Interview conducted and condensed by Nick Manes. Courtesy photo.