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Invest in disinvested areas

Invest in disinvested areas

Some parts of our region have experienced a persistent, long-term lack of market investment, leading to declining property values, tax receipts, employment, and population. Markers of economic disconnection and disinvestment exist in every county of the region, frequently appearing around older subregional job centers like Joliet, Aurora, Elgin, and Waukegan. Long-term patterns -- including the historical segregation of housing by race, as well as market shifts in residential and commercial demand -- have contributed to economic struggles in some areas. The multi-faceted and persistent nature of such disinvestment often outstrips the ability of any one community to respond effectively. Regardless of their assets, disinvested areas generally struggle to meet the core requirements of market feasibility, with exceptionally weak demand, a lack of anchors or agglomeration potential, negative reputation, and/or a lack of developer confidence in public sector capacity or market feasibility.[1],[2] Disinvestment can constrain municipal revenues as fewer and fewer residents and businesses remain to pay taxes.[3] Residents who are unable or unwilling to move -- many seniors and low income households, for example -- may make up a larger share of the community. These residents may also suffer poorer health than those who live in areas with more access to resources.

 

Disinvested areas broadly refers to both Economically Disconnected Areas (EDAs) and struggling commercial and industrial areas. EDAs have a concentration of low income and minority or limited English proficiency residents, while disinvested commercial and industrial areas have experienced a loss of economic activity over a sustained period. Both types of areas have substantive overlap. Solutions to promote vital places and new market-driven investment complement those targeted to promote economic opportunity for residents. ON TO 2050 also identifies strategies to build the assets and capacity of the region’s under-resourced communities. These combined individual, built environment, and community driven solutions are required to comprehensively promote inclusive growth.

 

[GRAPHIC TO COME: Local Strategy Map interactive feature showing the drivers of disinvested and Economically Disconnected Areas.]

 

Disinvestment also affects the ability of municipalities to serve their residents and businesses. A low base of property, sales, and other taxes can lead to higher property tax rates in communities struggling with economic development, furthering a lack of attention and investment from the private sector.[4] A mismatch between local property values and revenue requirements creates these high property tax rates in disinvested areas, and local policies like Cook County property tax classification can exacerbate the disparities. The resulting municipal revenue constraints can leave communities with fewer resources to invest in local infrastructure or public services, again furthering a cycle of disinvestment. The map below highlights the disproportionately high tax rates in many of the region’s struggling communities.

As highlighted elsewhere in ON TO 2050, lack of access to economic opportunity limits the ability of many talented and skilled residents to succeed. In particular, residents of disinvested areas, especially on the South and West sides of Chicago and in the south suburbs, often have to travel longer distances or take slower transportation options to reach high quality employment opportunities, education, training, and services. Recent analysis shows that residents of some EDAs and disinvested areas spend 58 hours more per year than the average resident commuting to work.[5] A critical part of promoting inclusive growth is helping to build economic opportunity and vibrant nodes within disinvested areas that have a historical lack of private investment. Most disinvested areas were economically thriving in the past and still have strengths to build upon. Many have highly desirable infrastructure assets, particularly public transit. Rebuilding disinvested areas will be critical to long-term regional prosperity by ensuring that jobs and economic opportunities are available in communities where economically disconnected residents live.

To achieve the vision of a region where all communities can thrive, CMAP and partners must pursue new solutions for disinvested areas. Given the conditions common in many disinvested areas, these solutions must differ substantially from typical, market-based planning and investment practices. While the TRA program would provide some needed tools and resources for disinvested areas, it will not suffice on its own. The following section highlights the additional relationship building, research, and coordination needed to relink these areas to the region’s economy. Strong and meaningful engagement of residents of disinvested must be at the core of all such work.

 

The following describes strategies and associated actions to implement this recommendation.

Identify new solutions and target existing resources in disinvested areas

While the proposed TRA program would help direct resources to disinvested areas, their unique challenges require a coordinated set of solutions. Many current drivers of disinvestment are structural -- owing to historical federal or state policy or to private sector investment strategies -- and are so persistent as to require regional scale solutions. Previous CMAP tax policy research has highlighted the benefits of reforming state tax policy while ensuring continuation of state support for local governments and phasing out property tax classification in Cook County to improve fiscal outcomes for municipalities with low tax bases or with poor fiscal conditions.[6] The federal government has recently created Opportunity Zones as one option to promote new investment.[7] New federal, state, and regional solutions will be required to overcome persistent lack of private capital and market-driven investment in these communities.

 

In other cases, the solutions will be more local, leveraging best practices and new partnerships. New research and best practice development could offer guidance on successful implementation of fast-track demolition programs, or assess available federal, state, or county incentives for utility in disinvested areas. One area for substantial work is land banking. Land banks bring important skills to address the vacancy and abandonment prevalent in disinvested areas. South Suburban Land Bank Development Authority (SSLBDA) and the Cook County Land Bank Authority (CCLBA) were formed to mitigate the effects of concentrated vacancies of residential, commercial, and industrial property. All of work within disinvested areas must be rooted in active and continual engagement of residents of EDAs and disconnected areas.

 

CMAP and partners should identify new regulatory, program, and incentive tools that would be beneficial to weak market areas in northeastern Illinois.

 

Regional land banks should work with CMAP and other partners to promote strategic investment in disinvested areas.

 

CMAP and partners should align road, stormwater, transit, and similar infrastructure investments to address the unique needs of disinvested areas.

 

CMAP and partners should collaborate on technical assistance, funding, research, legislative, and other initiatives to provide a comprehensive set of solutions to catalyze growth in low market areas.

Target assistance in rapidly changing areas to preserve affordability, quality of life, and community character

In adding more than 2.3 million more residents and 920,000 new jobs between now and 2050, our region will see some areas experience rapid new development. As covered under the TRA goal, CMAP understands the need for targeted technical assistance to such areas. Yet the impacts of rapid growth differ across the region. In disinvested areas, such investment may bring greater access to amenities and/or services. Yet such growth may also rapidly increase property values, potentially leading to displacement of existing residents, businesses, and community networks. Such displacement can, among other negative impacts, harm the health of affected residents. Communities can implement short- and long-term strategies to support their goals and assist existing and new residents in their neighborhood. This strategy also appears in the Governance chapter, under the recommendation to Build local government capacity.

 

CMAP and partners should identify disinvested areas experiencing rapid new development pressures and offer planning assistance.

 

Local governments should identify and implement policies and regulatory strategies to preserve affordability, quality of life, and community character.

Build local capacity to compete for infrastructure investments

A lack of adequate infrastructure can hinder reinvestment, posing particular challenges for disinvested communities whose limited financial capacity may impair their access to regional and federal transportation resources. Accessing these resources requires not only matching local funds, but also significant and costly predevelopment investments (e.g., feasibility studies, engineering designs) that can make projects infeasible for some low capacity municipalities. In addition to the TRA program, disinvested areas need creative approaches to removing the financial barriers that prevent them from accessing some transportation funding programs. New funding would address the difficulty low capacity communities have in entering and staying in the “pipeline” to build needed infrastructure projects. The recently started Invest in Cook program offered by Cook County offers one example of helping low income communities fund needed infrastructure improvements.[8] Through the program, communities can pay for planning and feasibility studies, engineering, right-of-way acquisition, and construction associated with transportation improvements sponsored by local and regional governments and private partners.

 

Transportation funders should develop creative approaches to removing the financial barriers that prevent disinvested areas from accessing some transportation funding programs.

 

IDOT should expand its transportation development credit program to apply to federal aid projects and direct funding assistance to preliminary engineering for priority projects in disinvested areas.

 

IDOT should direct funding to preliminary engineering for priority projects identified in LTA or other planning studies for EDAs or low capacity communities

 

The Metropolitan Water Reclamation District (MWRD) should continue offering matching funds to disinvested areas to support floodplain buyouts.

 

MWRD should explore prioritized stormwater management planning assistance to identify future capital projects in disinvested areas.

 

County stormwater agencies should explore opportunities to create programs that provide matching funds and planning assistance for capital needs in disinvested areas.

 

Municipalities with disinvested areas should work with financial institutions to apply for low cost loans for broadband, sewer, and other infrastructure that qualifies under the Community Reinvestment Act (CRA).

Build municipal, nonprofit, and private sector capacity

Addressing the myriad of challenges in disinvested communities requires concentrated, comprehensive resources. While investment and assistance from state and regional entities are critical to forge a new path for disinvested communities, building the capacity of communities, institutions, businesses, and residents of disinvested areas can sustain long lasting change. Lack of staff, funding, technical knowledge, and other resources can limit the ability of municipalities with a high proportion of disinvested areas to interrupt the cycle of disinvestment or meet their economic and quality of life goals.

 

Capacity building is also required for the private sector. Small businesses in low market areas could benefit from education on and connections to educational and financial resources. Creating a pipeline of local developers and business owners is also important. Beyond large scale, national firms, few developers have the requisite combination of skill, interest, and capacity to build projects in disinvested areas. Given this, the region needs more programs like the Chicago Urban League’s Chicago Contractor Development Program (CCD) to grow and strengthen small-scale developers and contractors.[9] Many mission-driven affordable housing developers -- like Preservation for Affordable Housing (POAH) or Hispanic Housing Development Corporation -- also provide capacity-building opportunities for smaller firms by intentionally including emerging firms and subcontractors in their projects. This strategy also appears in the Governance chapter, under the recommendation to Build local government capacity.

 

CMAP and partners like the Federal Reserve Bank of Chicago should work to bring banks and lending institutions together with municipalities to ensure that weak market communities have access to capital and financial services that support economic development.

 

Local governments should build relationships with financial institutions to access the resources they provide under the CRA.

 

Local governments should build their expertise about available capital and financial resources, develop a plan to attract those resources, and help businesses and residents to apply for these resources.

 

Community Development Commissions (CDCs), nonprofit housing developers, and larger municipalities should employ and cultivate smaller scale, minority and women-owned businesses to build their capacity.

 

Foundations and advocacy groups should continue to explore grants and other funding opportunities to help small-scale developers bridge funding gaps.

 

CMAP and partners should target technical assistance, trainings, and other assistance to municipalities in low income or low market areas.

Footnotes

[1] Kapple, K and Jacobus, R in Pindus, Wial, and Wolman (ed.s), “Retail Trade as a Route to Neighborhood Revitalization” Urban and Regional Policy and Its Effects, Volume 2 (2009): 19-69. See http://www.rjacobus.com/resources/archives/Retail%20Trade%20Proof.pdf.

[2] Artz, Georgeanne M., Younjun Kim, and Peter Orazem, “Does agglomeration matter everywhere? New firm location decisions in rural and urban markets.” Journal of Regional Science, Volume 56, Number 1 (2016): 72-95. See https://cba.unl.edu/outreach/bureau-of-business-research/academic-research/documents/kim/agglomeration.pdf.

[3] Maciag, Mike, “Demographics can spell trouble for a city’s finances.” Governing. September 15, 2016. See http://www.governing.com/topics/finance/gov-census-demographics-cities-fiscal.html.

[4] Chicago Metropolitan Agency for Planning, ”Property tax burden in the Chicago region,” November 28, 2017, http://www.cmap.illinois.gov/updates/all/-/asset_publisher/UIMfSLnFfMB6/content/property-tax-burden-in-the-chicago-regi-2.

[5] Chicago Metropolitan Agency for Planning, “Travel patterns in Economically Disconnected Area clusters,” January 25, 2018, http://www.cmap.illinois.gov/updates/all/-/asset_publisher/UIMfSLnFfMB6/content/travel-patterns-in-economically-disconnected-area-clusters.

[6] Chicago Metropolitan Agency for Planning, “Property tax burden in the Chicago region,” November 28, 2017 http://www.cmap.illinois.gov/updates/all/-/asset_publisher/UIMfSLnFfMB6/content/property-tax-burden-in-the-chicago-regi-2.

[7] U.S. Department of the Treasury, Opportunity Zones, https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx.

[8] Cook County, Invest in Cook, https://www.cookcountyil.gov/investincook.

[9] Chicago Urban League, “Chicago Contractor Development Program,” 2016, http://www.thechicagourbanleague.org/page/463.

 




 
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