Ground Zero in Urban Decline

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

Sam Staley from the November 2001 issue

(Page 3 of 4)

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 Rebuild 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 and 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 any 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 -- Planet-Feedback, 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 façade 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."