Ground Zero in Urban Decline.

Cincinnati isn't just a town down on its luck, It's the future of the American city.

Welcome to ground zero in inner-city decline: the Over-the-Rhine district in Cincinnati, Ohio. This is the neighborhood, settled a couple hundred years ago and named for the predominantly German immigrants who once populated it, that was at the center of America's most recent spasm of social turmoil. In April, after police shot an unarmed black man, hundreds of Cincinnati residents took to the streets to protest entrenched racism and economic inequities. Cincinnati--once renowned as the Queen City of the Ohio River, once dubbed "Porkopolis" for its dominance in pig processing, once famous as the home of baseball's legendary Big Red Machine--is now known for civil disorder and a sagging population. The 2000 Census underscores that Cincinnati's glory days were somewhere in the past: During the 1990s, the city lost over 30,000 residents, or about 9 percent of its population.

Any prospects for revival in this Midwestern city were dealt a staggering setback by images of smoldering fires in the streets, angry men hurling bricks through storefront windows, and shop owners holding vigil over their property with shotguns. In less than a week, more than 600 people were arrested for disorderly conduct, vandalism, and assault. Urban decay--vacant buildings, declining population, few jobs--provided the tinderbox for the riots that thrust this famously staid city into the national headlines.

If the nation was shocked--this was a town known for its conservatism, restraint, and bedrock Midwestern values--so were Cincinnati's city leaders. Prior to the riots, the business community had been cultivating the city's reputation as a bastion of middle-class values and the German work ethic, regardless of the current residents' cultural heritages. The unrest provided a dramatic counterpoint to other recent development efforts. Earlier this year, in a bid to win the 2012 Summer Olympic Games, local activists and leaders put together an 800-page document touting Cincinnati's competitive advantages. In 1996, voters in Hamilton County, of which Cincinnati is a part, approved a sales tax increase to underwrite the construction of two new professional sports stadiums--a baseball-only stadium for the Reds (the nation's oldest professional baseball team) and a separate football facility for the Bengals. The city and county have also invested substantial public funds in redirecting Port Washington Way, a freeway p roviding easy access to downtown from the outer edge of the metropolitan area.

All told, those recent investments in downtown and riverfront improvements have cost Hamilton County residents close to $1 billion, and that's not counting the interest on bonds. The city lists 34 projects on its downtown development plan; if everything on that wish list gets built, the total price tag would be something like $4 billion. And yet Cincinnati has little to show for the effort, other than some white-elephant public works projects and the wreckage--physical and emotional--from this spring's riots. "The problems of the city," notes city councilman Phil Heimlich, "are not so much that white and black people don't get along; it's that white and black people don't stick around. I think the most important fact is that the city has lost almost 10 percent of its population over the last 10 years.

Cincinnati is a very specific place: Well-known for its steep hills and riverfront location, it has been built into its landscape in a singular and striking way (Winston Churchill once called it "America's most beautiful inland city"). Yet Cincinnati is also a very generic place in today's America. It's a city smack dab in the middle of a long, slow decline--not just in population but in prospects for the future. Its story--a sad one, though not without some measure of hope--is one that is being played out in urban centers throughout the country. The reasons for Cincinnati's decline and the misguided attempts to reverse it are all too representative of what's happening throughout the U.S. today. For good and ill, what's happening in Cincinnati may well be coming to a city near you. If, in fact, it's not already there.

In 2001, the Fannie Mae Foundation studied three dozen of the nation's largest cities and found that most have been losing population since the 1970s. While some cities gained population during the '90s--including such long-bleeding cosmopolises as New York and Chicago--more lost ground: Cincinnati, Cleveland, Milwaukee, Rochester, Syracuse, Toledo, Baltimore, Buffalo, Detroit, Philadelphia, St. Louis, and the District of Columbia, among others, continued long traditions of population decline.

A closer look inside Cincinnati's city limits reveals a more troubling trend: Only three of its 48 neighborhoods added people between 1990 and 2000. One of those neighborhoods--Queensgate--only grew because the city built a new jail. Twenty-six neighborhoods lost more than 10 percent of their population. The Over-the-Rhine area saw its population shrink from 9,572 people to 7,638.

A Long Line of Spenders

Cincinnati's recent orgy of high-profile, publicly funded projects is hardly its first. At the turn of the 19th century, public works projects served mainly to line the pockets of political boss George B. Cox's friends, earning Cincinnati the reputation of a corrupt frontier burg. The excesses of corrupt city bosses helped inspire a series of reform groups, including the Taxpayers' League, in 1880. By the early 20th century, the same sort of public works projects were carried out in the name of social welfare--whether the project in question entailed constructing a 15-mile commuter rail and subway system or taking over the local utilities. Despite its public profligacy, Cincinnati ranked among the nation's largest cities at the turn of the 19th century--a gateway to the West and a thriving commercial center sustained by the Ohio River and the Miami-Erie canal. The city quickly became a center for industry, hosting the nation's largest concentration of factories making soap, cleaners, shortening, candles, oils , and chemicals. The legacy is symbolically embodied in the twin towers of Procter & Gamble's world headquarters in the heart of the city's downtown. Pork processing and beer brewing rounded out the list of major industries.

The city's German history reaches back nearly two centuries. An ethnic German was elected its first mayor in 1802, and by the 1840s, the city was printing bilingual ordinances. By the mid-l9th century, one-fifth of Cincinnati's population spoke German, and Germans are largely credited with the expansion of savings and loans, called "bauvereins," that created a foundation of homeownership among the middle and working classes. Even in the mid-20th century, high-rise apartment buildings were scarce, an architectural legacy that benefits even the poorest neighborhoods, including Over-the-Rhine.

In the wake of the riots, city leaders created a task force--Cincinnati Can--and charged it with developing recommendations to address the simmering problems of urban decline. The effort is strikingly similar to Rebuild LA, the largely ineffective effort to revitalize South Central Los Angeles after its riots in 1992. Whether Cincinnati Can actually does anything to revitalize the city, this much seems certain: It will provide cover for dozens of other projects that elected officials and prominent business leaders have trumpeted in recent years to stimulate the city. For instance, city leaders are pushing hard to expand the money-losing, municipally owned and operated Dr. Albert A. Sabin Convention Center. The proposal would double the size of the current convention center to more than 600,000 square feet.

Citizens for Civic Renewal, a nonprofit local urban reform organization, commissioned "regional government" guru Myron Orfield to do a study of the region. Orfield, an elected representative in the Minnesota state legislature, is best known for Metropolitics, an influential 1997 book published by the Brookings Institution that argued that declining inner suburbs were as much a victim of sprawl as central cities. Orfield's preliminary report, released earlier this year, highlighted growing inequalities among the city, its inner suburbs, and the growing outer suburbs, and called for regional planning to minimize them.

If his past is any prologue, Orfield's final report, to be released later this year, will call for more regional government and revenue-sharing to redistribute income from relatively wealthy neighborhoods (and suburbs) to relatively poor inner-city neighborhoods (and suburbs). A multibillion-dollar light-rail project has also been proposed by the Ohio-Kentucky-Indiana council of governments (OKI), an organization that includes 105 representatives of government, business, social, and civic groups in an eight-county region. Proponents argue that the rail system will do just about everything--reduce regional congestion, promote economic development, revitalize inner-city neighborhoods, and constrain sprawl.

The Actual Effects

What seems to be missing in the mess of publicly financed projects is any rational--let alone balanced--debate on whether such endeavors have any positive effects, much less the pie-in-the-sky results proponents routinely claim. Sports stadiums have emerged as a classic case in point. "Adding professional sports teams and stadiums to a city's economy does not increase aggregate spending for the city," wrote Lake Forest College economist Robert Baade, a leading expert on the subject, in a 1996 study. In fact, according to Baade's research, adding teams "appears to realign leisure spending rather than adding to it and is, therefore, neutral with regard to job creation." Baade's conclusions are based on his analysis of economic growth in 48 cities between 1958 and 1987, some with and others without new professional sports stadiums. Other analysts go even further, arguing that public investment in a sports stadium might reduce economic growth by siphoning money away from other important projects, such as road imp rovements, or from lowering taxes.

Clemson political scientist David Swindell echoes Baade's concerns. Swindell has studied the general economic and neighborhood impacts of minor and major league professional sports stadiums in places as varied as Indianapolis; Fort Wayne, Indiana; Arlington, Texas; and Cincinnati. He stresses that stadiums and convention centers have a "marginal impact" and "might even be negative"; he has seen "no evidence to support subsidies for private companies" in this way.

"Part of the problem," says one frustrated elected official in Cincinnati who requested anonymity, is that "people in this city look around and ask what [nearby] Indianapolis has done and they want to do that better." There's no question that Indianapolis, just a couple of hours northwest of Cincinnati, has grown in a major way, adding more than 40,000 people to its population between 1990 and 2000. Although Indianapolis is more than four times larger than Cincinnati (362 square miles vs. 78 for Cincinnati), Cincinnatians still compare the cities since their respective metropolitan areas are about the same size: 1.5 million people. Between 1974 and 1992, the period of the most intense investment in its downtown, Indianapolis funneled $2.76 billion into various development projects, most of which were centered on sports.

The civic leaders who cite these cases fail to check the peer-reviewed academic research that shows that Indianapolis' downtown development has largely failed. One of the most extensive studies of Indianapolis comes from Clemson's Swindeil, Indiana University political scientists Michael Przybylski and Daniel Mullins, and Mark Rosentraub, author of Major League Losers and director of Indiana University's Center for Urban Policy and the Environment. Published in the Journal of Urban Affairs in 1994, the study found that such investments in Indianapolis increased sports-related employment by 60 percent. But since these jobs accounted for just 0.32 percent of all jobs in the Indianapolis economy, the overall effect on economic development was negligible.

"Indianapolis' focus on its downtown area and sports as a development strategy was associated with a general trend of increased employment and economic growth," conclude the authors. "However, Indianapolis' strategy did not result in more growth than was experienced by other Midwestern communities and did not lead to a concentration of higher paying jobs in the region." In short, Indianapolis' growth was the result of larger regional economic trends and the expansion of existing businesses, including a dramatic increase in Indiana University-Purdue University's employment base from 3,000 full-time faculty and staff to 8,200. Moreover, although the city's raw population grew from 1990 to 2000, its share of the region's population fell from 52.9 percent to 48.8 percent.

And even if public-sector investments did fuel job growth downtown, nearby neighborhoods would still be unlikely to see benefits. Consider Cleveland, the notorious Rust Belt city that pumped millions of public dollars into revitalizing its downtown during the 1980s. The value of commercial properties downtown doubled in value during that decade, but commercial property values outside the downtown fell by 4 percent overall.

Ironically, while local leaders look to other cities for new programs and projects, few look to those cities whose citizens have rejected such measures. Just two hours up I-71 from Cincinnati, voters in Columbus, Ohio, turned down a 1997 measure to publicly finance a new soccer stadium and a new hockey arena. Both facilities were eventually built anyway-with mostly private money-and both now house professional sports teams, despite predictions that public funding would be crucial to land the franchises.

Studies by the Pound

Cincinnati's emphasis on large, visible downtown development projects is in part a reflection of the "expert" advice proffered by consultants who have "studied" their "feasibility" and "economic benefits." In the case of the city's convention center, consultants concluded that Cincy needed a bigger (and more expensive) facility to compete with other cities. More recently, OKI released the results of its study from a national consulting firm "quantifying" the benefits of the first leg of the proposed multibillion dollar rail system, a light-rail trolley line extending from Northern Kentucky through the downtown of Cincinnati and up to its northern suburbs.

The studies seem endless at times, and the intent of most is transparent. One, written by Vanderbilt management professor Richard W. Oliver, purported to show the economic benefits of having the NHL Predators in Nashville. It was titled: They Shoot! They Score! NHL Nashville Predators Score Winning Goal for Middle Tennessee! Convention center expansions fit the same mold. "The rhetoric of convention center investment is drawn from 'feasibility studies' often developed by a national accounting or economic research firm," explains Heywood Sanders, a professor of political science at the University of Texas at San Antonio. Sanders has researched convention centers and their economic Impacts for almost two decades, reviewing dozens of feasibility studies and writing numerous professional articles and reports, including a highly regarded 1998 article in the policy journal The Public Interest. "These studies lay out an invariably positive market analysis, justifying more local convention space and lending visible, supposedly objective support to political pressures to spend more public money for convention centers."

The studies are little more than marketing tools for chambers of commerce pushing one project or another; despite popular local support, big and small cities across the nation are littered with failed economic development projects, almost all dramatically oversold by their proponents. What's too often missing is the bottom line.

In a study last year written for the Boston-based Pioneer Institute, a market-oriented think tank focusing on Massachusetts policy issues, Sanders documents the shrinking market for conventions, a harsh reality that is rarely acknowledged by gung-ho city big wigs and their consultants. Most forecasts during the 1990s for trade shows and conventions were "unreasonable and unreliable," Sanders writes. Total event counts declined from 1998 to 2001, and average tradeshow attendance dropped by more than 24 percent. Large, money-making conventions are gravitating toward a select few locations--Atlanta, Orlando, Las Vegas, Chicago, and New York. Other traditional destination spots, such as Boston, haven't fared well, with events there slipping from 71 in 1996 to just 63 in 2001. Even large, vibrant, expanding metropolitan areas such as Houston or Dallas don't have what it takes to be competitive in the current convention market.

Along with stadiums and convention centers, consultants tout light-rail transit projects with reports that project fantastic benefits. Untold in these "studies" is the fact that the benefits are the product of computer models and have never been achieved in the real world. For example, in 1978, planners in Portland, Oregon, forecast that by 1990 the city's light-rail ridership would be 42,500. In reality, it was half that. In Sacramento, light-rail ridership was initially projected to be 50,000 on an average weekday. By 1998, average weekday boardings were 28,000 (slightly higher than a revised projection made once local officials had committed to the project). Studies typically highlight the congestion-relief benefits of rail transit, even as transportation planners refuse to argue that these benefits exist. Indeed, in his 1998 survey of rail transit investments built since 1980, Jonathan Richmond of Harvard's Taubman Center for Local Government concluded that none had appreciably reduced congestion in citie s.

Nevertheless, OKI is pushing a 117-mile system of seven rail lines criss-crossing Cincinnati. The twin goals: to bring people back into the city and reduce road congestion. A 1998 estimate by OKI pegged the cost of the entire system at $1.8 billion. A single line running from Northern Kentucky through downtown Cincinnati to suburban Blue Ash might cost close to $900 million. And that's a conservative estimate: Large public investments are notorious for coming in over budget. A light-rail system being built in Jersey City, New Jersey, was supposed to cost $1 billion, but costs have exceeded the early estimates with just two-thirds of the track laid.

Real Development

This isn't the first time Cincinnati and Hamilton County have dabbled in rail--or been taken to the cleaners while doing so. In 1912, reformist mayor Henry Hunt proposed a 15-mile rapid rail transit system; ironically, he thought it would help relieve congestion in the inner city by letting people live farther apart from one another. By 1920, private contractors were digging tunnels in the drained Miami-Erie Canal bed. The project was abandoned in 1927, after the costs ramped up well beyond original estimates and the rampant corruption became public. The entrances to buried subway stations and rail lines are still visible for those who know where to look.

In the 1920s, when the reform-minded Charter Party was voted into office, Cincinnati became the first major city to adopt a comprehensive plan. "In this concept," notes Ohio State University professor Laurence Gerckens, one of the nation's leading authorities on the history of American planning, "legal control of community development is used as a tool for, and is subservient to, the realization of a set of long-range comprehensive community goals." Later, the city developed a freeway (the recently realigned Fort Washington Way) that was explicitly designed to bring people in from the edges of the city and dump them into the downtown.

Cincinnatians took this approach to heart. Throughout the 20th century, city leaders took on one scheme after another using public money. Urban renewal and federal dollars helped pave over and renovate the Union Terminal railroad station on the West Side of town in the 1970s. Cincinnati also poured millions into the perennially troubled convention center in the 1960s, giant Riverfront Stadium in the 1970s, and the Fountain Square and Fountain Square West developments in the 1980s. The '90s, of course, brought stadiums for the Reds and the Bengals.

It's tempting to blame such projects on the "edifice complex," well-known among elected officials who want to leave their mark on a landscape. But such projects aren't simply the brainchild of elected officials or faceless bureaucrats. The business community consistently provides very visible support. With corporate giants such as Procter & Gamble and Chiquita Banana headquartered downtown, the Cincinnati business community flexes its muscle for public largess, especially in the core city. "Cincinnati is one of the clearest cases of the 'Downtown will save us' approach," says one outside observer still advising local officials. "In any other context, the business community would be talking about the virtues of unfettered free markets. When it comes to protecting 'their' investments in the core city, they are unified in their belief the public sector should pay for it--anything goes.

Such efforts are not only ineffective and wasteful. They stand in stark contrast to the bottom-up economic development efforts that pop up in neighborhood after neighborhood, often right under the noses of local development officials. One of the most dramatic examples is "Toy Town" near downtown Los Angeles. As city leaders were throwing around millions of dollars in post-riot Los Angeles through the high-profile but ineffective Republic LA, Charlie Woo was taking advantage of a market opportunity. Mr. Woo, a Hong Kong-born former graduate student in physics at UCLA, realized the depressed downtown real-estate market allowed him buy or lease old warehouse space for $1 or $2 per square foot. He used those bargain-basement prices to get a foothold in the toy manufacturing and distribution industry. Over the ensuing decade, more and more toy distributors, manufacturers, and retailers took advantage of the accessible and affordable location, building the area into an economic juggernaut employing 5,000 people an d generating half a billion dollars in sales annually. City officials were completely unaware of Toy Town until its presence was simply too large to ignore an',' longer (See "Movers & Shakers," December 2000.)

So there's always hope for down-on-their-heels urban areas. Indeed, even in Cincinnati, spontaneous economic development is happening right under the noses of local officials despite apparent "neglect" by the well-heeled big-business sector. About 80 technology-focused companies have located along a 10-block stretch of Main Street in Over-the-Rhine, making up what has become known as the "Digital Rhine" (digitalrhine.com). To some extent, the tech district is the product of Main Street Ventures, a private development company that owns five buildings and provides space to 13 businesses.

The Digital Rhine

Created in 1999, Main Street Ventures is a private effort to promote tech companies in the Digital Rhine. It is also a response to a market trend in Cincinnati. Tech businesses were sprouting up all across the region, but a few local leaders thought that concentrating the budding industry in one area would give it the synergies necessary to grow. By attracting similar businesses to the Digital Rhine, investors also felt they could get more attention from venture capitalists, banks, consultants, and technology providers. Main Street Ventures grabbed the attention of some tech-sector heavy hitters: Taft, Stettinius & Hollister, Procter & Gamble, Oracle, Whittman.Hart, Compaq, Microsoft, Broadwing, Lucent, Deloitte & Touche, Fifth Third Bank, and the Greater Cincinnati Chamber of Commerce all provided substantial resources that allowed it to expand its services.

Why is this happening in Over-the-Rhine, one of the poorest neighborhoods in the city? Access to technology is one factor. Cincinnati Bell, the local telephone utility, laid fiber optic cables here and, based on proximity, it was the easiest, least costly access point.

But location isn't the whole story. The district also has a key amenity in abundance: historic architecture, with many buildings dating to the 1840s and 1860s. As urban renewal was bulldozing other parts of the city, the Over-the-Rhine district maintained its architectural integrity. Rents were also affordable, typically half the going rate in other parts of the city, Artists, bars, and restaurants had pioneered a commercial foothold on the first floors of many buildings. Main Street Ventures leased a floor in a building and advertised for resident companies. In 1991, the first two-PlanetFeedback, an on-line consumer empowerment firm, and ConnectMail, an electronic video messaging company- moved in.

The spontaneous establishment of a commercial district in a hot new market, however, didn't prompt a flood of public money and support from city council. Which isn't to say that the city council completely neglected the fledgling commercial center. "The city has done a super job with infrastructure improvements," notes George Molinsky, an attorney with Taft, Stettinius & Hollister who is widely credited with spearheading revitalization efforts in the district. "The city has invested in new sidewalks, stepped up policing, buried wiring, provided decorative lighting, and created a facade programm an environment conductive to additional flaxade program to spiff up several neglected buildings. "This helped create an environment conducive to additional investment by the private sector," notes Molinsky.

But in terms of public outlays, that's about it. While the Digital Rhine continues to get vocal and productive support from several city council members and local pols, the city has largely taken a hands-off approach, letting the private sector lead the way.

What of the riots? They were, after all, in Over-the-Rhine, though not in the high-tech end of the neighborhood. But Los Angeles has shown that riots do not have to be a death knell for neighborhoods. South Central's population climbed to almost 1 million in the 1990s. Almost 3.000 manufacturers are still located there, employing 80,000 people.

Similarly, the early signs after the Cincinnati riots are positive in the Digital Rhine. No companies left because of the unrest, and several have actually moved in. As long as the city provides the sort of minimal infrastructure it has in the past, there s no reason the Digital Rhine--and other entrepreneurial zones--can't flourish.

Yet cities such as Cincinnati make such development more difficuLt by continuing to focus on white elephants rather than the basic reforms that can help generate a broad economic base. Developers complain that many building inspectors are too narrowly focused on minimizing any risk when they should be letting the market innovate and diversify. Inspectors are focused on the narrowest interpretation of the law, and many rulings are arbitrary. Many developers in Cincinnati think of this as the cost of doing business, but it makes those areas less competitive than their suburban counterparts. Red tape shouldn't be considered simply another cost.

The city requires six complete documents to get a permit, and another week to process the permit once the documents are signed. On top of that, Hamilton County requires up to an additional two weeks. Obtaining a building permit takes only two days in nearby Clarmont County. Warren County, north of Cincinnati, requires one week. Developers expect four to six weeks in the city of Cincinnati. Builders also complain of not being able to find employees to start the permit application process in the city's Department of Public Works. Building standards sometimes double the costs of laying infrastructure on properties. "As a result," notes one large homebuilder, "we have made the decision to substantially limit our building in the city to projects that are financially feasible. Unfortunately, a project in the city rarely qualifies as being financially feasible. It simply isn't worth it for us."

Housing activists have also effectively created a moratorium on new construction in Over-the-Rhine. How? By passing ordinances that require developers to pony up the equivalent of $4 per square foot for low-income housing if they want to tear down an existing house. The unintended consequence is "demolition by neglect"--property owners let their properties deteriorate to the point where inspectors have to condemn the building, allowing them to circumvent the ordinance, tear down the building, and develop the property.

No Magic Bullets

Still, some key players are trying to improve the overall business climate and move away from the big-spending, big-ticket items that have historically plagued Cincinnati's development strategy. City Council member Pat DeWine pushed through legislation that eliminated entire classes of permits for minor repairs and renovations to homes. A bigger change, however, may come when the city reforms its 38-year-old zoning code. The city did little to overhaul the code before a comprehensive review process began in 2000.

The goal, says Steven Kurtz, a planner in the city's land-use management division since 1991, is to create more certainty in the process by simplifying zoning and development review. Kurtz notes that the revised code should reduce the number of zoning districts, streamline the public hearing process, and allow more varied and mixed uses. Planners hope to send a draft ordinance to the planning commission by the end of the year. These are small steps, to be sure, but important ones.

The larger lesson for Cincinnati and other cities is to look beyond a single magic bullet--the one major project or set of projects that true believers think will pull a city into great times. "I tell folks in Cincinnati the same thing I tell them in other medium-sized cities," says convention center expert Sanders. "You are pursuing a strategy that is essentially imitative; at the same time you're discussing expanding your convention center, so are all other cities."

David Swindell, the Clemson political scientist, reinforces the point. "Many politicians know full well that there are no magic bullets, but getting a new neighborhood grocery store is not front page news, and it takes a lot of work to create a climate so that one will locate in a given area." In the meantime, warns Swindell, politicians chase white elephants in their downtowns. The result is that a "lot of needs go unmet--streets are slow to be paved. More attention needs to be paid to the neighborhoods because they are important to providing a quality of life that can attract people to the inner city."

The best advice for urban renewal might come from the people actually investing in the Digital Rhine. "Do an exceptional job when it comes to the basic issues that cities are responsible for, such as infrastructure," says Molinsky. "Tax incentives are nice," he continues, but entrepreneurially minded people really want to live and work in neighborhoods that are "clean, safe, affordable, interesting, and eclectic, with valuable amenities."

Whether Cincinnati and other cities can learn this lesson is not clear. But their futures are riding on it.

Sam Staley is director of the Urban Futures Program at the Reason Public Policy institute and co-founder of the Buckeye Institute for Public Policy Solutions, a think tank based in Columbus, Ohio. Staley has written widely on planning and land use. He recently co-edited, with Randall G. Holcombe, Smarter Growth: Market-Based Strategies for Land Use Planning in the 21st Century (Greenwood Press).