Editor’s Note: The Board of Directors of Civic San Diego is set to approve an economic development work plan at their February 24th meeting. In short, this is their grand vision for San Diego. Sadly, this vision doesn’t include the living wage provisions required of large local development projects over the past decade. Board member Murtaza Baxamusa was the sole opposing vote at a recent committee meeting.
By Murtaza Baxamusa
For low-income communities, the promise of “economic development” is often held as the basis for taxpayer-subsidized projects. However, developer-driven focus on projects, rather than people, has the theory of local economic development upside-down. This is what happens when a downtown development corporation starts working on a plan for economic development for other neighborhoods.
It is often easy to forget why we do economic development. Not every project, nor every neighborhood needs it. Ultimately, the key metric to measure the success (or failure) of any economic development intervention should be whether local residents are working in better-paying jobs. If the disposable income of the average household in a neighborhood increases, the market will respond accordingly. There will be more amenities, shops, restaurants, services that will be attracted to the buying power of local residents. On the other hand, if household incomes in a neighborhood stagnate, then local businesses stagnate too and perpetuate the lack of opportunity.
Development subsidies often fuel income inequality by rewarding employers who create low-wage jobs, according to a report published by the non-profit Good Jobs First. The report is based on a database of firms linked to billionaires and major corporations.
This is why the Living Wage Ordinance adopted by the City of San Diego since 2005 required economic development agreements which provided subsidies of half a million dollars over a five-year period to pay low-wage service workers a living wage (currently $14.43 an hour). Civic San Diego (CivicSD), then called the Centre City Development Corporation was exempted, and “encouraged to adopt its own living wage policy.”
During its tenure as a downtown-centric redevelopment agency, it had a questionable record on job creation, prompting an independent audit to conclude that it was not doing enough for economic development of neighborhoods as other peer agencies. Even today, CivicSD remains the only city entity that does not require subsidy recipients to comply with the city’s living wage law.
Many of my colleagues and the leadership at CivicSD have opined that developers will not accept our subsidies, and projects will not get built if we impose labor standards. This is a red herring not founded in fact. A peer-reviewed study by Professor Bill Lester of the University of North Carolina examined major economic incentive programs in the nation that required employers to pay a living wage, tracked business and employment over time, and controlled for those cities that did not have such requirements. It found that there is no evidence that a living wage requirement for economic incentives impacted business outcomes. Dr. Lester concludes:
“The findings of this study suggest that such calls to lower labor standards in exchange for jobs are not grounded in fact. Ultimately, living wage ordinances are one tool that a city can use to create jobs of greater quality.”
Simply put, would a rational developer turn down millions in free taxpayer funds in order to avoid increasing the lowest wage at that project to $14 an hour? If the answer is yes, the community deserves a better employer.
CivicSD has refused to require employers to pay their lowest-wage workers a living wage, even when they benefit from millions of dollars in economic development subsidies.
And yet, CivicSD is exploring several areas of funding, including the EB-5 program; Cap and Trade program; state financing districts including Community Revitalization Authorities (AB2) and Enhanced Infrastructure Financing Districts, the Federal Capital Magnet Fund Program, and Retail and Marketing strategy; and Workforce Development programs. These funds are intended to ultimately replace redevelopment revenues for CivicSD, as it gets phased out. At this time, there appears to be no jurisdictional or geographical scope/limit of this proposal within the city/region.
One example is the “Transit Oriented Development Fund” for which CivicSD has engaged New York-based Forsyth Street Advisors, to create and manage a $50 – $100 million asset fund. This follows previous failed attempts by CivicSD to create a $50 million fund to buy up strip malls using questionable financing schemes. Since I do not know the sources of the funds or what they will be spent on, or the standards they will be subject to in this current proposal, it is difficult to evaluate. However, what I remain concerned about is that a contract has executed, without approval of the City Council, without establishing the specific parameters of citywide activities and enforceable community benefits.
Public agencies use “economic development” where the market fails to provide the desired level of private activity absent public intervention. There is a considerable debate in economic literature about the kinds of projects, level of subsidy, and expected returns. For example, a rigorous analysis of Chicago’s tax increment financing districts shows that it fails the “but-for” test, with no evidence of tangible economic benefits (like job creation) for residents that would not have occurred absent these districts. To make matters worse, tax increment appears to have crowded out other investments, reducing the relative appreciation of property values in comparison to similar properties outside these districts, when the infrastructure was financed by property tax increment. Furthermore, some scholars have questioned whether place-based initiatives actually address the structural causes of economic injustice and poverty.
This issue is too important to be outsourced. It is difficult to understand why the City is delegating the planning and execution of these economic development programs. What is the relative value added by these programs to our City residents among different neighborhoods, and if so, who decides on these priorities? Is there a conflict-of-interest in the consultant (CivicSD) putting together a funding proposal for the City that maximizes fees and commissions for itself? And most importantly, how can the City allow public subsidies to be handed out through CivicSD, bypassing and undermining its own Living Wage Ordinance?
Developers who justify their projects with poverty-wage jobs only create further economic blight in our low-income neighborhoods. I care about economic development too deeply to allow these issues to be glossed over. Until they are addressed satisfactorily, I cannot support CivicSD’s Economic Development Work-Plan.
Murtaza Baxamusa, PhD, AICP, is the Director of Planning and Development for the San Diego County Building and Construction Trades Council Family Housing Corporation, and teaches community planning at the Sol Price School of Public Policy at the University of Southern California (USC). He received his doctoral degree in planning from USC, and is certified by the American Planning Association.