By Dave Gatton and Carolyn Merryweather
November 17, 2003

Mayors and business leaders met in New York City on Wednesday, November 12 to chart a new agenda for keeping America's metro economies strong as the nation enters a new phase of economic global competition.

The cornerstone of that agenda is the group's effort to develop a national infrastructure plan to bolster business development and, thus, the competitiveness of the nation's metro economies — which contribute over 85 percent to the nation's gross domestic product, 88 percent to its labor income, and 84 percent to the job market.

According to an updated report presented at the summit by the American Society of Civil Engineeers, 9 of the 12 categories of the nation's infrastructure, ranging from roads to energy, received a "D" grade based on condition and performance, capacity vs. need and funding adequacy.

"Our infrastructure is falling apart at a point when we need to strengthen our competitiveness in the global economy," said Conference President Hempstead (NY) Mayor James A. Garner, who presided over the summit. "For our future economic security, we must have a national conversation on infrastructure investment that will create jobs and spur further private sector investment in our cities."

The concern for jobs was underscored at the summit by a new report issued by the Conference and the Council for Investment in the New American City analyzing the types of jobs lost in the recession as well as the types of jobs forecast to be gained over the next two years. Most noteworthy, jobs lost had an average salary of $43,000, while jobs gained had wage levels of only $36,000 — an 18 percent drop. The report was prepared by Global Insight, Inc, an economic forecasting firm.

Council Chair Detroit Mayor Kwame M. Kilpatrick said that the report highlights how manufacturing-dependent regions of the country, principally the Midwest and South, will see the slowest job growth in the near future. "Cities like Detroit are working to refashion their economies around new technologies, such as fuel cells and emerging products, to find their niche in the global economy," he said. "We need a new level of collaboration with the private sector to attract higher paying jobs and investment. This summit is the start of that process to find concrete solutions."

Brian Reardon of the White House National Economic Council briefed the participants on recent positive reports on the economic recovery. "The President's tax cuts are working," he said, pointing to 7.2 percent growth in the economy for the third quarter. He also cited the economy's average productivity growth of 4.3 percent over the last three years and the President's priority to make the tax cuts permanent.

"This president is not satisfied unless every worker who wants a job has one," Reardon said.

Special guest Ambassador Felix Rohatyn encouraged the group to look at new institutional arrangements that would allow for greater and longer term investment of pension funds in infrastructure development. He agreed with Reardon that the deficit is not the immediate concern, but that restoring business investment is of paramount importance.

Conference Executive Director Tom Cochran encouraged Reardon and the White House to look closely at incentives to leverage private sector investment in brownfields and vacant land. "With a modest investment, we can attract incredible private sector resources," he said. Reardon agreed to further discussions on attracting such investment to brownfield sites, and cited regulatory relief as important to developers.

The mayoral delegation was led by U.S. Conference of Mayors President Hempstead Mayor James A. Garner, Conference Vice President Akron Mayor Donald Plusquellic, Advisory Board Chair Long Beach Mayor Beverly O'Neill, and Council for Investment in the New American City Chair Detroit Mayor Kwame M. Kilpatrick.

The private sector was represented by leading construction, engineering, real estate, housing and financial firms.

Infrastructure

Dr. Michael Walton from the American Society of Civil Engineers and professor of civil engineering at the University of Texas at Austin, started the meeting by introducing the report card on the state of the nation's infrastructure. The report grades infrastructure in the areas of roads, bridges, transit, aviation, schools, drinking water, wastewater, dams, solid waste, hazardous waste, navigable waterways, and energy. Overall, in 2001 America's infrastructure grade was a D-. Their assessment of progress made in the last two years continued to fall.

According to the ASCE, $1.6 trillion is needed over the next 5 years to repair the nation's crumbling infrastructure. "The soundness of our infrastructure affects people in their everyday lives," said Plusquellic. "When parents put their kids on a school bus, they rely on safe roads, bridges and schools to safeguard their children."

National Association of Realtors President Walt McDonald highlighted the importance of transportation infrastructure to the housing industry. "Buying a house isn't just about a structure and a lot, it's also about transportation," he said.

"In the back of every potential homebuyer's mind are questions like: How long will my commute be? How far am I from shopping? How congested are the local streets? How will my kids get to school?"

And the group also emphasized that infrastructure directly impacts the competitiveness of the national economy.

O'Neill spoke about her city being served by the third-largest shipping port in the world and the subsequent pressure on its local infrastructure. She remains concerned that aging bridges and roads are used to transport goods from Long Beach to rest of country; and without significant investment to restore that infrastructure, there could be serious consequences.

The L.A. Long Beach port is expected to handle over 20 million containers annually in the coming years. Its impact on the economy was demonstrated in the last year when a strike halted the movement of these containers to the rest of the nation. "This is a real example of how our infrastructure directly affects our commerce," said O'Neill. "Without a renewed commitment to invest in this infrastructure, we put our global competitiveness in jeopardy."

Amtrak Chair David Laney agreed with O'Neill that infrastructure investment is vital to the preservation of shipping and transportation lines, and pointed out that since 1980, freight rail traffic is up 175 percent, while investment in maintaining rail lines is not what it should be. To avoid enormously expensive repairs in the future, investment is needed now. Rail is not currently included in the ASCE report card because it is largely privately owned. However, Dr. Walton assured attendees that future reports will assess the needs of the nation's railroads.

North Little Rock Mayor Patrick Henry Hays applauded Laney's presentation to the group and committed the strong support of the Conference for increased funding for preserving and modernizing the nation's passenger rail system. Hays serves on Amtrak's Local Government Advisory Board.

Mayor Rita Mullins of Palatine (IL) stressed the need for balance. She said that all of the elements on the ASCE report card were necessary to make communities work. "Infrastructure is the foundation upon which everything else is built, and yet it has been a chronic problem for many years," she said. She suggested that one solution to solving the problem is to offer new incentives to invest in infrastructure across the board.

Housing and Real Estate Development

Mortgage Bankers Association Chair Robert M. Couch briefed the summit on the important role housing and refinancing played in softening the impact of the recession and propping up consumer spending.

"The real estate finance industry originated $6.3 trillion in mortgages for 2001, 2002 and the first two quarters of 2003, and during this time, $230 billion in equity cash-outs have been invested in education, cars and home improvements," he said.

Couch also called on the group to push for passage of President Bush's American Dream Tax Credit to promote single-family affordable housing and for an expansion of the brownfield tax incentive passed in 2000.

National Multi-Family Housing Council President Douglas M. Bibby encouraged the mayors to focus on multi-family housing as a means of repopulating cities and creating a consumer market for commercial and retail businesses. He noted that many young professionals want the excitement of city life, and that suburban models of development may not attract this sought-after segment of the labor market to cities.

Freddie Mac Vice President Jim Park encouraged a domestic agenda that included increasing homeownership rates and new rental production. He urged the group to promote a strong secondary mortgage market for both single family and multifamily mortgages.

Education and Job Training

National Urban League President Marc Morial cited the Council's jobs and wage report to highlight that structural changes will continue in the economy. "We have to look below the surface of the economic recovery to see what is really happening," he said. "Not only do we have a wage gap between jobs lost and jobs gained, we also see increases in unemployment among African Americans." While unemployment improved for the nation as a whole last month, the rate for African Americans worsened.

"Globalization is structurally affecting the American economy and American workers; when cities do well the nation does well," Morial said. He called for a new agenda to enhance the competitiveness of metro economies that would include a stronger commitment to education and retraining.

Plusquellic agreed saying, "Education, in the long run, is the only thing that will make a significant difference in transitioning from a manufacturing to a services economy."

President and COO of Lion Apparel, Steve Schwartz, and Anne Habiby, Co-Executive Director of the Initiative for a Competitive Inner City, talked about ways to close the skills gap. Mr. Schwartz gave an example of how his company has transitioned from being primarily manufacturing-based to becoming service-based, and has actually exported their technical and operational knowledge overseas to countries such as Germany and the UK. He agreed with Plusquellic that the only way for more businesses and cities to make a similar transition is to focus on education and job training, and that the private sector can help the public sector accomplish this shift.

Habiby brought attention to the rapidly expanding health care field and suggested that our nation's leaders move beyond the paradigm of health care as social policy exclusively. In light of the industry's typically higher wages, she challenged Summit participants to consider the economic policy advantages associated with health care.

At the press conference held in conjunction with the Summit, Kilpatrick cited the need for infrastructure development and the jobs it would produce as a strategy for addressing the need for higher paying jobs. "This is important information for mayors and chief executives because it dramatizes our need to develop policies that support globally competitive jobs with mid to high-level wages. By investing in our nation's infrastructure we can create high-paying jobs for architects, engineers, and construction workers, which will help us close this significant wage gap as well as revitalize our infrastructure." Cedar Rapids Mayor Paul Pate suggested that the nation use the report as a baseline to benchmark improvement when addressing the nation's employment issues.