M A R C H / A P R I L 2 0 1 3 Vo l. 1 7, N o. 2 P l ac e making a n d P l ac e - B a s e d I n v e s tment as Economic Development in Light of a Changing Economy Co m m u n i t y p l a n n e r s h av e b e e n P l ac e m a k i n g l e a d e r s f o r d e c a d e s ; our work has long emphasized the links between public gathering places, housing alternatives, multi-modal transportation connections, cultural and entertainment centers, recreation, and more. Our efforts contribute to the creation of communities of lasting value where people want to live, work and play. Our feature article this month highlights the value of local placemaking activities and initiatives and sets the stage for future Michigan Planner articles in the coming months that will detail the tools and resources to support local placemaking efforts. The premise of placemaking as an economic development tool recognizes the inseparable relationship between quality places and investment. In light of our transformation from a manufacturing economy to a knowledge-based economy, the concept of placemaking is a logical strategy that centers on improving a community s appeal, desirability, and overall quality to drive economic prosperity. The Changing Economy and the Importance of Place The current economy is undergoing a significant transformation from industry and manufacturing to a knowledge economy based on technology and the management of information. While the impact of this economic transformation in Michigan is relatively new, the factors upon which it is based are not. Communication technology, globalization, and the availability and manipulation of information have been evolving for many years. The knowledge economy can be defined as production and service based on knowledge-intensive activities that P L A N N E R I N S I D E S P R I N G I N S T I T U T E 2 0 1 3 : L E S S O N S I N E Q U A L I T Y R e g i s t r a t i o n f o r m i n s i d e! ( s e e p a g e 1 4 ) P l u s : B O N U S I S S U E! Extra content, extra info, same great magazine! Four extra pages in this issue of the Michigan Planner magazine! contribute to an accelerated pace of technical and scientific advance. The key component of a knowledge economy is a greater reliance on intellectual capabilities rather than a physical input or natural resource. The importance of more traditional factors for economic development such as population centers, transportation networks, and raw materials is diminished. Michigan Future, Inc. (MFI) is a non-partisan, non-profit organization striving to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. MFI observes that the most successful economies are those that are concentrated in the knowledge-based sectors primarily health care, education, information, financial services and insurance, and professional and technical services. In their Fifth Annual Progress Report, MFI documents that despite the current health and upward trend of the auto industry, the path to prosperity no longer rests with the traditional industrial base of Michigan for the following reasons 1 : Continued on page 3 P L A C E M A K I N G.................................................. Pa g e S 1, 3-7 C o n n e c t............................................................ Pa g e 2 L E G I S L AT I V E U P D AT E......................................... PA G E S 8-1 2 O F F I C I A L LY Y O U R S............................................... PA G E 1 3 S P R I N G I N S T I T U T E 2 0 1 3 R e g i s t r at i o n.................. pa g e 1 4
3 Placemaking Continued from page 1 Michigan s prosperity last century was primarily built on good-paying, lower education attainment jobs. Those jobs are gone. Forever. The automobile manufacturing industry will never again be the major engine of prosperity in Michigan. It will be substantially smaller, employing far fewer workers and paying them less, with fewer benefits. The decline in automobile manufacturing is part of an irreversible new reality that manufacturing (work done in factories) is no longer a sustainable source of high-paid jobs, nor is it a source of future job growth. Manufacturing accounts for less than 9% of the American workforce today, while it accounted for 32% of the nation s jobs in 1953, and 14% in 1998. Manufacturing s share of American jobs has been declining for a long time. ALPENA, Michigan MIPlace.org Figure 1 Talented people like places with natural, social, creative, entrepreneurial, and intellectual capital MFI also identifies that successful areas are distinguished by a concentration of talent, where talent is defined as a combination of knowledge, creativity, and entrepreneurship. Thus, attracting and retaining talent has to be the driving force behind the resurgence of our Michigan economy. 2 The quality of a place plays a much larger role in today s economic decisions than in recent years. As capital and people are more mobile than ever, the quality of a place also matters more than ever before. Quality places retain and attract skilled and talented people who in turn retain and create jobs. People choose to live, and ultimately invest, in places that offer community amenities, social and professional networks, resources and opportunities. (Figure 1.) Your Community as an Investment Environment Traditional economic development has focused heavily on financial incentives. The theory behind this approach is that business will only be attracted or relocate to a place if there Quality places retains and attracts talent Talented people create jobs is sufficient financial incentive to do so. By far the most common method used in local economic development has been to stimulate private investment activity through indirect public investment. The principle behind indirect investment infers that an area that both looks and functions better will have an advantage in attracting investment over less-desirable areas. Improved landscaping, dramatic entries, convenient parking, upgraded utilities, and enhanced pedestrian amenities are all improvements that will enhance the character, function, and viability of an area. Frequently, physical improvements are coupled with business promotion programs. While indirect investment may be targeted to a specific area, it is frequently justified as a benefit to the community as a whole, especially if jobs and tax base are created. While such indirect investment can stimulate private investment, it can be difficult to quantify the effect and may take years to see a return.
4 Creating Creating Partnering Stimulating Partnering Stimulating Figure 2 The traditional approach to economic development emphasized stimulating and partnering within the investment. Figure 3 Current thinking is shifting towards creating an environment for investment through placemaking and place-based investment. The more aggressive approach to traditional economic development has been to invest public dollars in private activity through partnering. (Figure 2.) Direct investment puts government in the position of becoming a partner, in one form or another, in a private enterprise. Specific direct investment activities typically include optioning and/ or assembling land, providing lowcost loans, and providing direct grants. While the return on initial investment may be felt sooner, as a partner the public also assures a higher degree of risk. Many have also argued that direct investment does not work well in creating sustainable business development. Companies that benefit from direct investment often relocate when a better deal is offered elsewhere. Based on limitations, delayed return on investment, and uncertainty of partnering and stimulating, there has been a shift in the economic development approach, especially in Michigan. This shift seeks to better understand investment decisions made by new entrepreneurs and to create improved investment environment through place. (Figure 3.) The decision of a private individual to invest in a community is no different than any other type of investment decision. The decision will be heavily influenced by how the individual perceives the community as an environment for investment. People make investments, whether it is their time, talent, or money, based upon their assessment of the potential return or benefit. All investments are made on the basis of an assessment of relative risk and the perception of a favorable investment environment. Investment decisions are ultimately made b y individuals, institutions, and corporations according to their own interests, but these interests are increasingly influenced by place. DOWNTOWN NORTHVILLE CLOCK michigan.org CAMPUS MARTIUS, DETROIT Project For Public Spaces In formulating an economic development strategy that best responds to the shift to a knowledgebased economy, the first and most essential step is to think of your community as an environment for investment. Why would someone want to invest in your community? Start by asking what assets, services
5 and growth opportunities does your community provide. How can you create an environment for investment that is attractive and reduces the risk for the investor? Placemaking is relevant for all communities and types, from urban centers to rural settings, along what is known as the transect. The urban-to-rural transect defines a series of zones that transition from rural farmland to the dense urban core. The elements of place such as mixed-use development patterns, walkability and other multi-modal transportation options, and the range and affordability of housing, to the quality of the schools, and access healthcare and culture become much more important when you are trying to attract people instead of companies. The quality of place shapes day to day life and long-term opportunities. If the basic community elements are not established, if the infrastructure is inadequate, if quality of life is not offered, why would someone invest their time, talent, or money in your community? The perception of an investor regarding the quality of place is also influenced by the philosophical message communicated by decisionmakers. A strong philosophical basis and positive message of who we are and where we are going can be far more important than any type of incentive that can be offered. A placed-based investment strategy signalizes a stronger commitment to the community and doesn t reflect policy changes based on political or external influences. This in turn reflects a stable community, and thus reduces risk. Improving the Environment for Investment through Placemaking Although planners use the term all the W h at i s P l a c e - B a s e d I n v e s t m e n t? Place-based investment takes an inclusive approach to community development by targeting performance-based quality of place initiatives that maximize investment and collaboration by local governments, economic development organizations, and local institutions. This approach coordinates and builds on the combined skills and experience of multiple entities including national, state, and local agencies, business community, community residents, and community leaders. Place-based investment attempts to recognize the interaction between investment and the creation of place, quality of life issues, and economic growth. This approach recognizes that community development issues are interconnected, and so solutions must be as well. For example, place-based investment recognizes that a dollar spent on housing will also have an impact on transportation, the environment, and other issue areas, as well. Place-based investment recognizes the role of providing public goods can have upon community and economic development. E l e m e n t s o f P l a c e - I m p r o v i n g Good communities are the result of a number of place-improving elements, including: Mixed-use development Provision of quality schools Creation of a business friendly government Quality infrastructure Valued public spaces Multi-modal transportation options Housing options Recreation, arts, and culture opportunities Park and open space There has been extensive, excellent literature and planning documents written about placemaking including Northwest Michigan Council of Governors Community Placemaking Guidebook, and the miplace.org. These references detail placemaking, provide a step by step guide to placemaking, and includes numerous case studies. Search these resources for more information. MARK S CARTS undergrounddetroit.com
6 P l a c e m a k i n g i s a P r o c e s s, N o t a P r o d u c t Placemaking is a process that merges the interconnection between people and places. People and place shape each other. Places develop, decline, and expand, based on people who live and work there. Contrary to popular belief, the concept of placemaking does not give us a clear roadmap for identifying the investments that are most likely to make a major economic difference in a community. Placemaking is more than a plug-and play strategy. Planners cannot simply cut and paste placemaking elements that have worked in one community and expect miraculous result when applied to other struggling places. Placemaking leverages the inherent quality of a place so that it may be taken advantage of. It s not just about plopping down cool urban amenities. Quality places are not imported to or imposed on a community but rather created within it. Making place is part observation, part vision, and part physical creation. Placemaking in this sense is really place-improving. WIXOM, MICHIGAN Photo courtesy of author time, placemaking means different things to different people. The term was originally utilized by architects, landscape architects and planners in the 1970s to describe the process and results of creating a unique place that people wanted to use, to be in, to enjoy, and/or to remember, usually because it was interesting and/or pleasurable 3. This definition tends to consider the concept of placemaking at a micro level, essentially dissecting a community on a site by site basis. However, placemaking in the sense of place-based community investment considers the concept in a broader sense as a transformative tool that focuses on talent retention and attraction by creating quality communities, providing quality amenities and services, and offering an overall high quality of life. While placemaking is not a new concept, placemaking as a strategy for economic development is receiving increased attention and funding from both the public and private sector. The Obama Administration has explicitly endorsed placemaking policy, and has revised federal funding around placebased investment strategies. More significantly, the state of Michigan is leading the way in placemaking an as TROY, MICHIGAN Photo courtesy of author economic development strategy for recovery. Placemaking as an economic development tool has also found its way into policies and strategies across state government from the Governor s office to the Michigan Economic Development Corporation to the Michigan State Housing Development Authority to the Michigan State Extension and the Michigan Association of Planning. To promote the concept of placemaking the state has created www.miplace. org, a website that outlines state efforts to create places. Most importantly, there are new efforts at the state level to coordinate f unding for transpor t ation, infrastructure improvements, housing, and other community development initiatives around place-based investment. Coordinated place-based investment is aimed at improving our communities by building upon local and regional assets to stimulate and leverage private investment. As local governments are losing tax base, local banks are being consumed by conglomerates, and local businesses are falling to larger
7 HYDE PARK, CHICAGO DOWNTOWN GLADWIN, MICHIGAN national retailers, we are losing local wealth and, concurrently, our sense of place. While, no economic or community development strategy should be viewed as a quick-fix to complex social and economic problems, placemaking can be an effective economic development strategy, especially targeted towards creating an environment for investment. P l a c e m a k i n g a s a n e c o n o m i c development strategy involves coordination between local and state government, businesses, residents, and civic institutions in an effort to increase economic opportunity, improve the quality of public amenities, and increase flow of investment into the built environment. Significant development always builds from existing assets and points of strength. Strong communities have competitive assets. As such, communities without identification of assets and strength are not positioned to utilize placemaking as a major development strategy at either the regional or neighborhood level. In order to create and rebuild place, we must encourage local investment to reconnect the economy and community. Tying it All Together P l ace-based investment and placemaking initiatives are not mutually exclusive and must be done with cohesion. Growing your local businesses without providing a sense of place may be a futile effort. Conversely, creating a place without providing efforts and resources to improve local businesses will not significantly increase economic growth. Placemaking recognizes the connection between public and private investment partially the way in which community assets directly influence development, social change, and wealth creation. Through the adoption of placemaking and place-based investment strategies, communities are learning there are untapped opportunities to grow their own local economies. Focusing on creating better places that nurture an environment for investment can in turn cause significant economic growth by developing the competitive advantage a community and improving local economic prospects in place, rather than trying to import place and opportunity from elsewhere. Tied together these two initiatives create an environment of investment. 1. Michigan s Transition to a Knowledge-Based Economy: Fifth Annual Progress Report, Michigan Future, Inc., October 2012 2. Ibid. 3. http://www.pps.org Author R i c h a r d K. C a r l i s l e, A I C P, P C P is the President of Carlisle Wortman Associates, Inc. of Ann Arbor, Michigan, and has over thirty-five years of professional experience. He is a member of the American Institute of Certified Planners and is a registered Professional Community Planner. Author B e n j amin R. C a r l i s l e, A I C P, L E E D - A P is an Associate of Carlisle Wortman Associates, Inc. and is a member of the American Institute of Certified Planners. He specializes in long-range community planning and urban development. Carlisle Wortman Associates is a member of the Michigan Chapter, Planners in Private Practice Division