By Dave Gatton and Carolyn Merryweather
December 13, 2004

Mayors and top national business leaders gathered in Washington (DC) December 9 for The United States Conference of Mayors Council for the New American City's Second Annual Economic Summit. The group discussed ways to promote investment and spur growth in the nation's 318 metro areas.

The Summit also focused on the need for a national alliance with the business community to ensure that metro economies are protected in the upcoming national debates on economic policy, federal tax reform, and budgetary priorities. President George W. Bush has indicated that he intends to tackle both Social Security reform and tax reform in his second term, both topics to be discussed at a White House economic conference next week.

"U.S. metro areas are the engines that drive the national economy," said Conference President Akron Mayor Donald L. Plusquellic. "To keep metro areas globally competitive, we must continue to invest in them through a strong Federal partnership and public/private partnerships," he added.

Summit participants debated how certain tax reform proposals could have a deleterious effect on the global competitiveness and growth of metro economies. According to Global Insight Inc, economic advisors to the Conference, metro economies will play an increasingly important role in the national economy, growing to 87 percent of the nation's Gross Domestic Product over the next two decades.

The group also discussed the importance of expanded investment incentives in redeveloping the nation's 600,000 brownfield sites, the need for a 21st Century Transportation system, and how to ensure the strength of the nation's housing sector.

"Our continuing investment helps keep metro areas strong and competitive," said Mortgage Bankers Association Chair, Michael F. Petrie. The National Association of Realtors' chief economist David Lereah told the group that housing kept the economy afloat during the last recession and is key metro economic growth in the future.

Ruben S. Barrales, Deputy Assistant to the President for Intergovernmental Affairs, addressed the Summit to review President Bush's domestic priorities for the Second Administration. Barrales told the group that Social Security reform, tax reform, completing the reauthorization of TEA-21 are top priorities for the President, as are creating new Opportunity Zones to help cities that have suffered job losses from business closings.

Plusquellic was joined at the Summit by Conference Vice President Long Beach Mayor Beverly O'Neill, Advisory Board Chairman Dearborn Mayor Michael Guido, Trustee Gary Mayor Scott King, Housing and Community Development Chair Columbus Mayor Michael Coleman, and Redondo Beach (CA) Mayor Greg Hill.

Business leaders attending the summit included representatives from the Mortgage Bankers Association, the National Association of Realtors, Countrywide Financial, the International Council of Shopping Centers, the National Urban League, Fannie Mae, Merrill Lynch, the Real Estate Roundtable, Veolia Water, and the Initiative for a Competitive Inner City among others. They made presentations on private investment in emerging markets, housing production and FHA reform, new markets and browfield tax credits, public/private partnerships for water and wastewater facilities, brownfields, transportation development, and competitive cities.

U.S. Metro Jobs Update

To kick off the discussion, the mayors heard a presentation on the challenges facing U.S. Metro areas by Phil Hopkins from economic forecasting firm Global Insight. According to the updated jobs report presented by Hopkins, during the year ending in October 2004, 259 of the nation's 318 metro economies had registered some job growth, while 59 metros experienced job declines. Among the metro areas with positive job growth during the last year, 125 had an employment growth rate fast enough to absorb new people into the workforce.

The report also showed that 145 metros have not regained all the jobs lost during the last recession, and 77 of those metros will not regain jobs until 2008 or later. Fifty metros will not reach pre-recession levels until 2010 or later.

Following the jobs report, Dierdre Coyle of the Initiative for a Competitive Inner City, and Lamont Blackstone from DLC UrbanCore, representing the International Council of Shopping Centers, spoke on the importance of attracting investment to U.S. cities. Coyle spoke about a new study called "The State of the Inner City Economies" which found that strong inner cities and strong Metro Statistical Areas (MSAs) go together, however most inner cities under-perform their MSAs. The study also found that there is unrealized market potential, particularly for retail, in inner cities. "Competitive advantage will flow to those who understand these customers," Coyle told the mayors.

Blackstone agreed, remarking that, "Conventional business opportunity measurements tend to underestimate true market demand in the inner city, and as a result many businesses overlook economically viable urban locations." Both Blackstone and Coyle urged the mayors to work with developers to help them better understand the specific needs and opportunities in their cities.

In the Housing session, Michael Petrie, Chairman of the Mortgage Bankers Association, told the mayors that, "As mortgage bankers we understand that cities and suburbs, which make up metropolitan areas, really function as one economy." He addressed the need for FHA reform to strengthen FHA's ability to invest in new technologies, create new products, and to better serve renters and potential homeowners, called for joint support of an FHA zero downpayment program to help first-time homebuyers and to close the minority homeownership gap.

Jimmie Williams, First Vice President for Legislative/Regulatory Affairs for Countrywide, agreed that FHA reform is needed, and urged the mayors to work with the private sector to develop policy recommendations for the 109th Congress and the second Bush Administration.

Tax incentives for projects such as brownfields clean-up efforts, attracting new business investment, and encouraging homeownership were also addressed as ways to stimulate metro economies. Thomas S. Darden, CEO of Cherokee Investments, spoke about ways that his company has worked with cities to clean up brownfield sites, and how important tax incentives are in that process.

Elyse Cherry, CEO of Boston Community Capital, spoke about the New Markets Tax Credit, and how cities and businesses can benefit from it. The NMTC allows taxable investors to make equity investment in Community Development Entities (CDEs) and receive a tax credit covering a portion of their investment. It also requires that 85 percent of the qualified equity investments in CDEs must be used by the CDE to provide investments in low-income communities. Proceeds must be used to make loans and investments in qualified businesses, to purchase "qualified" loans from CDEs, for financial counseling in low-income areas, and to make loans and investments in CDEs.

Chris Hodgkins, General Manager and Vice President of Veolia Water North America, spoke to the mayors about the value of public/private partnerships in infrastructure. Hodgkins sited the need for over $500 billion of water and wastewater infrastructure investment and how the private sector could bring both operational and capital efficiencies to systems in need of investment.

Mike Walton, Chair of the American Society of Civil Engineers Report Card Committee, underscored the deteriorating state of the nation's infrastructure by giving the mayors a preview of ASCE's 2005 report card, which will include evaluations of the nation's rail system, public parks, and security. In their 2001 report card, the average grade of the 11 graded infrastructure categories was a D-. Walton encouraged the mayors to look at the report when it is released in March and to promote it in their cities.

The meeting closed with a commitment from the mayors and the private sector representatives to hold another meeting at the Conference of Mayors Winter Meeting from January 17-19 in Washington (DC). They pledged to work together to create a Mayors 2005 Metro Agenda and to encourage investment in America's cities and metro areas.