Thursday, December 27, 2007

Spending and studies - do both need to stop?

Mayor Carty Finkbeiner wants to spend $100,000 to do a study of the entire city, "looking for a way to kick the city into a full growth mode."

He wants to hire Social Compact, Inc., to do a neighborhood market analysis, like they've done in nine other cities across the country (Chicago IL; Cleveland, OH; Detroit, MI; Washington DC; Jacksonville, FL; Santa Ana, CA; Harlem, NY; Houston, TX; and Oakland, CA).

According to the report in The Blade, Carty believes this type of study will show that Toledo has a higher population than census trend projections predict. But that's not the only benefit, according to the Mayor:

"We're going to do it not only for the census … We are going to do [the analysis] in terms of examining the targets - the targets for economic development in Toledo that haven't been tapped," Mr. Finkbeiner said last week. "In Houston, Texas, they came back and said you could do a central-city mall and it will work."

"Nobody thought that would work, and now it employs, I'm told, 2,000 people full and part-time," he said.

Except, according to Social Compact's website, it wasn't the non-profit company who recommended a central-city mall in Houston. It was developer - Ed Wulfe of Wulfe & Co., who decided a mall might make sense after the study revealed 25% more people in the shopping area than the census trends had predicted.

Interestingly, in every study Social Compact has done, they've found that
1) aggregate household income,
2) number of households, and
3) number of residents
were higher than census trend projections indicated. So, it actually makes sense that Carty would expect a study of Toledo to show the same things. However, this is probably an indication that census trends are projected incorrectly, more than some new-found cure-all for growth within a city.

Social Compact's market study (called a DrillDown) takes a look at the markets, not at the geographic boundaries of an area – like council districts or zip codes. Primarily, they evaluate income, population, buying power, etc. The studies provide business-oriented data and market ‘insights’ – they didn’t take the next step to recommend how the data should be used.

But private companies, using the market data, made decisions about whether or not they should provide services within the studied areas. The major changes made in the neighborhoods were new bank branches, ATM machines and check cashing services (because many of these areas rely primarily upon cash transactions and a cash economy), a grocery store and a Target, and entertainment venues.

The problem with these types of 'new' businesses is that it was all re-directed spending. The people in these neighborhoods certainly weren't going without groceries, they were just getting them from another area. They were obviously shopping and enjoying various entertainment, but in other parts of the cities. By adding these types of businesses in the neighborhoods, they allowed the residents to obtain services within the neighborhood, and that was probably a smart business decision for many of the companies.

But there wasn't NEW spending as a result of these studies - or if there was, it isn't documented on the website.

So how might Toledo benefit from spending $100,000? Don't we already acknowledge the need for a grocery store in the central city/downtown area? Well, Carty thinks it all starts with correct population counts - and with higher population counts, he believes we'll be able to get more money in federal grants.

But Carty should be careful what he wishes for. Many federal grant programs rely upon more data than just population. In testimony before Congress in October, 2007, the General Accounting Office – GAO – found that 85% of federal obligations in grants to state and local governments are distributed on the basis of formulas that use data such as population AND personal income.

If the study shows increased population AND increased incomes, we may gain because of the population, but lose as a result of the higher median incomes. It’s likely that gains in grant monies because of higher populations are OFFSET – or even REDUCED - as a result of gains in median incomes, which EVERY report by Social Compact has shown.

The GAO analyzed Social Services Block Grants and how they’d be distributed using differing methods for calculating population. They looked at two different counts and found that the differences in grant monies between the two methods was only a quarter of a percent. Washington DC would have gained the most by switching to a different method of population count - but only $67,000. Minnesota would have lost the most due to the different population count - $344,000. Under the different method, Ohio would have lost .79% of its funding ... less than 1%, but still a decrease rather than an increase in funds coming to the state.

HUD – which give us the CDBG grants is based upon:
- percentage of low and moderate income persons compared to the national percentage
- percentage of pre-1940 housing units compared to the national percentage
- population growth/loss compared to all CDBG-eligible communities.

So, if we do a study that shows our incomes are higher, and our population growth is higher than other CDBG-eligible communities, this could negatively impact the amount of our CDBG funding.

The problem is that Carty probably read somewhere about the mall in Houston and thought – hey, why don’t we do that here? That’s what he does – he reads about something someone else is doing and then ‘decides’ to do the same thing here – incorrectly assuming that the same action will produce the same outcome in both Houston (in the mall example) and Toledo.

Would such a study be helpful to Toledo? Maybe. I'm confident the private sector would know how to use the data, but I'm pretty sure the city wouldn't. Perhaps Carty should listen to the man he's hoping will save the city:

"Developer Larry Dillin, creator of the Levis Commons outdoor mall who has been tapped by Toledo to revitalize Southwyck and the Marina District, said he generally relies on what retailers tell him instead of studies.

"There have been a couple of studies done, not on the city as a whole, and I would say that kind of information is a benefit for someone thinking of making a financial investment in the community," Mr. Dillin said. "We study those kind of things in market analysis very carefully. It doesn't mean we always agree with it.""

1 comment:

Hooda Thunkit said...

IMNHO, once something catches our "beloved" mayor's attention, we're doomed to suffer through it and it will be success, despite any results to the contrary.

Here we go again :-(

Sigh. . .

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