Patrick's new spending needs 'place' component
January 28, 2013
FOR WELL OVER A DECADE
now, squeezing growth out of the Massachusetts economy has felt a bit like getting that last ounce of toothpaste from the tube. Gov. Deval Patrick proposes to change this terribly frustrating challenge by calling for big new spending on education and infrastructure. To accelerate growth and expand opportunity, this investment may be necessary, but it will not be sufficient. The state will also need to make a complementary commitment to help transform “places” in our Gateway Cities, making them more attractive to individuals and more productive for businesses.
Consider the young innovator the governor spoke about who was moving from the Seaport District to New Bedford in his State of the Commonwealth address. Like so many of our Gateway Cities built to serve a water-powered economy that existed a century ago, New Bedford suffers from a real estate market that bears the scars of decades of adverse industrial change. Construction costs in that city outstrip property values by as much as three to one. Bankers simply won’t put money into redevelopment projects needed to create the attractive affordable housing this young worker would demand because current valuations are too low to adequately collateralize their loans.
The new South Coast commuter rail line Patrick is proposing will surely bring real estate values up in New Bedford, but, like other Gateway Cities that have great MBTA stations – communities like Brockton, Lawrence, Lowell, and Lynn – the added value will not provide enough of a boost to trigger the private investment in neighborhoods around the station that’s needed to transform the community. If we don’t change this economic reality, the spending the governor has called for to build new rail lines and sustain current transportation infrastructure will not produce strong returns for taxpayers.
Without a complementary commitment to place-making, there is also a real risk that the education investment the governor has called for will underperform. Recent research from Northeastern University shows Massachusetts must more than double the production of multifamily housing from current levels to accommodate future growth. If this doesn’t happen, the resulting housing shortage will create a severe drag on the economy; residents we spend considerable sums educating will leave the state in droves, just as they did during the early-2000s.
The good news is that today’s young working families are much more amenable to urban living than those from generations past. We no longer face the impossible task of convincing suburbs committed to blocking development to build more housing. But young workers are only drawn to cities with environments that serve as both a living room and a backyard. With the state’s help creating truly vibrant and attractive neighborhoods in Gateway Cities, these urban centers can attract new residents and accommodate future housing needs.
To make this happen, the Patrick administration must tailor investment to support redevelopment projects that are truly transformative. These types of investments require a real departure from our current practice of spending limited funds thinly around the state. We will need to make larger, more targeted investments in projects that can credibly demonstrate how public dollars draw private capital back into these cities, restoring the healthy function of the real estate market.
In a paper released last week, we called upon the state to make these types of investments happen by placing $1.7 billion over the next decade in a fund dedicated to transformative redevelopment in Gateway Cities. If half of these dollars can be reallocated from current resources, the additional capital could be raised for about $10 per year from the average taxpayer. And this cost would only be incurred if these investments don’t pan out. The upside potential here is real. If the investments are made wisely and they contribute to job growth and stronger cities that require less state intervention, taxpayers will reap a dividend rather than a bill.
Getting that last drop of toothpaste from the tube is an admirable Yankee tradition. The equivalent in economic policy, relying only on businesses within Route 128 to grow the entire state’s economy, doesn’t serve us well. As we have seen, this approach places a ceiling on wealth generation. In Governor Patrick’s words, to “accelerate growth and expand opportunity throughout the Commonwealth, we have to invest more.” Alongside spending on education and infrastructure, we should consider complementary investments in place that enable our great American cities to reassume their important role as growth engines in regional economies across the Commonwealth.