By Dave Gatton
June 28, 2010

The Council for the New American City met at the 78th Conference of Mayors in Oklahoma City on June 11 to hear about the state of the economic recovery, long-term trends in economic development, and the continued housing foreclosure crisis.

Chaired by Conference of Mayors Trustee Columbus (OH) Mayor Michael Coleman, the Council heard from IHS Global Insight Regional Economics Director James Diffley, who briefed the mayors on the state of economic recovery. Echoing other economists, Diffley said that the jobs recovery would be painfully slow. "As more and more workers return to the job market, we could actually see some months where the unemployment rate ticks up, or at best slowly declines," he told the mayors. Diffley provided unemployment projections for the nation's 363 metros for 2010 and 2011. By the end of this year, 110 metros will have painfully high unemployment rates exceeding ten percent. For 2011, that number decreases to 77, but 174 metros still will have unemployment rates above eight percent. Diffley said that these numbers called for additional federal assistance to create jobs on main street.

"These are sobering unemployment projections," said Coleman. This Council must continue to work to find ways to provide ways for distressed cities to rebuild their economies and create jobs."

Norman Jacknis, of Cisco, provided a briefing on actions mayors could take now to make their cities competitive in 2030. He told the mayors the world was fast becoming a place of "ubiquitous, high quality visual communication and easy collaboration, enabling anyone anywhere to virtually meet anyone else anywhere else." "What changes over current laws of economics is that physical proximity will no longer be the only or dominant way to connect people," he said.

Jacknis projected that traditional economic incentives provided by state and local governments would no longer guarantee jobs, citing the Pfizer Research Lab, which opened with $7 million in tax incentives and closed in December 2009. Similarly, a Dell advanced manufacturing plant opened in 2007 with $6 million in tax incentives and closed December 2009.

"When most people can work anywhere, where will they choose to live and work?" he challenged the mayors. Under Jacknis- projections, the individual increasingly becomes the key unit of economic activity. As the costs of coordinating activity of these individuals goes down, more small and flexible teams are likely, resulting in more individuals having more choice in where they live since they can take their economic activity wherever they go.

Jacknis said that the future will bring a hybrid physical and virtual world, resulting in a need for cities to refresh their zoning, planning, and building codes to accommodate video-conferencing that is a game-changer. He said that by 2013, global online video will be 60 percent of consumer Internet traffic, up from 32 percent in 2009.

He exhorted the mayors to make their cities technologically competitive and to continue their focus on quality of life issues. "People will choose to live based on quality of life," he said, implying that their job will be transportable to wherever they want to live.

Meghan Sullivan of the Mortgage Bankers Association reviewed the level of participation in the HAMP program, the U.S. Treasury's efforts with lenders to help homeowners modify mortgages and avoid foreclosure. The program has had moderate success, but has fallen below expectations as homeowners struggle with unemployment. She also referred to a new law adopted in Colorado and supported by the Governor and several cities, which would provide for a quicker resolution to property that is abandoned. The law, called the Expedited Foreclosure Bill, H.B. 1249, provides for a quicker transfer of abandoned foreclosed properties to the lender as a means of ensuring that vacant homes become reoccupied quickly. By expediting the process the property can more quickly be resold and occupied avoiding further blight in the neighborhood. The MBA projects that more than 20 percent of defaulted properties become abandoned by their homeowner, often without the borrower ever contacting their mortgage company.

Robert Klein, Chairman of Safeguard Properties, outlined the MERS Property Preservation data base, developed at the suggestion of the Council, to help cities find the proper servicing and property preservation contact within the lending community. The service is free of charge to cities and is available by contacting mersinc.org or 800-646-MERS. Klein also introduced the REO Clearinghouse as a mechanism for helping cities aggregate properties in their efforts to implement the NSP program. For more information on the REO Clearinghouse, contact Heidi.coppola@reo-ch.com.

Newly elected Conference Trustee Des Moines Mayor T.M. Franklin Cownie encouraged the Council to work with the Metro Economies committee on developing specific proposals for Greening the Tax Code, a policy that he has advocated as the Congress next year turns its attention to tax reform.