I’m a big fan of the concept of Economic Gardening which is the exact opposite of Economic Big Game Hunting. I’m also a big fan of Cincinnati. So I thought I’d use Cincy to demonstrate examples of various strategies for economic development. I should start by defining the terms here. Economic Gardening is the process of incrementally building value by nurturing small local projects – not so much with tons of money, but with sensible management. A modest property or business can be gradually improved and made more valuable on a tight budget. For example, a parking lot can be turned into a farmers market. Regulations can be relaxed so a cafe that employs ten people can expand by putting extra tables on the sidewalk or a back patio and can then take on two new employees. A small granny cottage can be built in the back garden of a typical tract home with a simple change of the building and zoning codes. Economic Gardening is fast, relatively cheap, and involves low risks if things don’t work out as planned.
This is in contrast to Economic Big Game Hunting where attempts are made to lure in large outside projects with the use of subsidies, tax holidays, and special privileges that don’t apply to the general population. The assumption is that these projects will serve as a catalyst for growth and development for the entire area and will lead to greater employment and tax revenue for everyone.
Economic Big Game Hunting is the default setting for just about everyone everywhere these days. We can start with individual homebuyers. When shopping for a home people are encouraged to purchase the largest most expensive home in the most exclusive neighborhood their budget can possible accommodate. This encouragement comes from real estate agents, mortgage bankers, and the broader American culture. People make assumptions that property values will always go up, that they “deserve” a premium home, that their children must attend the best possible schools, that they can’t put a price on safety and security, etc. Families routinely leverage themselves into prestigious properties as part of a Big Game Hunting strategy to build personal wealth through home ownership. Debt is taken on in the expectation of future equity and a fat profit down the road. Sometimes this works. Sometimes (as the crash of 2008 demonstrated) it ends in tears.
Governments routinely engage in Economic Big Game Hunting too. Just about every town these days has a cluster of car dealerships, a premium outlet mall, a casino, an office park, a convention center, a stadium, etc. that was given special assistance as part of a local economic development program. The details vary, but the concept is similar everywhere. Property taxes are waived for many years in a TIF (Tax Increment Financing) scheme, grants and “forgivable” loans are provided, historic preservation funds are pulled together, a $20 million highway expansion is built to accommodate a large enterprise, and so on. The theory is that market forces alone are insufficient to get these projects built so government assistance must be brought in to ensure that the mall or casino or auto dealership thrives. Somehow the presence of these projects will eventually trickle down to support the larger economy through sales tax, and other knock on effects.
The Horseshoe Casino in Cincinnati is a classic example of Economic Big Game Hunting. The city provided a full buffet of incentives and subsidies with the expectation that jobs would be created and new investment would be attracted to the area. Personally I believe that if a company can’t make enough money selling liquor and gambling to pay for their own building they don’t deserve to be in business. But that’s never what these subsidies are about. It’s really about making sure that your town gets the casino rather than the town ten miles down the highway. Developers are very good at playing towns off each other to see who will provide the maximum goodies. Towns know this of course, but the lure of a big shiny project is irresistible and local officials pee their pants if they think someone else might get it instead. And what a fine handsome building this particular casino is…
Now let’s look at an example of Economic Gardening in Cincinnati. This modest Dutch colonial home (see here) sits in a part of town that doesn’t seem to attract much attention from the folks who build casinos. It’s a moderate to low income neighborhood seven minutes from downtown. It has excellent historic architecture, a walkable and bikeable street grid, reasonably good public transit, and plenty of forested open space due to the hilly topography. But it has some problems. A group of neighbors realized that the neighborhood was beginning to deteriorate as cheap houses on their block were being bought by absentee slum lords who would then rent the properties to unsavory individuals. Drugs had become a particular problem. So they created a neighborhood organization and when the next home appeared on the market they passed a hat around and collected enough money to buy the house themselves. This particular house had a solid frame and good foundation, but the interior had been stripped of everything worth taking including the copper pipes. It was purchased for $6,800. The community group cleaned and repaired the property and got it up to a good standard. They’re looking to sell to respectable buyers who share their desire to keep the area safe and friendly. The refurbished home is now for sale for $64,000 which reflects the going market rate in the area.
Jim Schenk is one of the founders of the Enright Ridge Eco Village as well as a member of the Imago Earth Center. These are serious Economic Gardeners. Here’s how he described the process. “The first house we did, we asked members of the community to lend us $500 or more for one year and they could choose the interest rate they wanted. This was the early 90’s when interest rates were high. We used the money to buy and repair our first house. When we sold the house we paid off the people who lent us money. Half asked for no interested, I think the highest interest rate was 4%. So far we have rehabbed eight houses on our block. We use volunteers as well as a local contractor who doesn’t charge an arm and a leg. We have been able to end up in the black on all of the houses that we bought and sold. We only buy houses that would go to an “investor”, mostly foreclosed properties. If a house will sell at market rates we will advertise it as part of the community, but not buy it.” This same group bought a commercial building on the corner of their block and converted it to a yoga studio and zen center and rent the apartments upstairs to like minded people. They also bought a failed nursery and commercial greenhouse and organized a CSA (Community Supported Agriculture) system in the neighborhood and now grow and sell local veggies.
When I walk around the neighborhood I don’t see blight or crime. I see a great place full of families and solid historic homes with well tended gardens and people who actually care about each other. This is the kind of place I’d actually want to live in. It also happens to be incredibly affordable and productive without any special government programs or subsidies.
It can certainly be argued that the multi-million dollar Horseshoe Casino has had more of an impact on the city than a handful of low budget home renovations. But when you look at the cost vs. return on investment the Gardeners are likely ahead of the Hunters. Unfortunately Hunting is a lot sexier and the true costs are hidden.