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Reclaiming a Regional Resource:

A Progress Report on The Department of Housing
and Urban Development’s Canal Corridor Initiative

EXECUTIVE SUMMARY

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Despite its significant human and natural resources, the economy of upstate New York has not shared in the prosperity produced by a long period of national economic growth. If upstate New York were treated as a separate state, its eco-nomic performance would place it at the bottom of the list of states. Over the 1992–98 period, the state’s rate of job growth ranked 49 th among 50 states. Although the transition from a manufacturing to a service economy and the cost of doing business in New York communities are often cited as the bases for sluggish job and wage growth, a look at the full range of trends affecting upstate New York suggests that a more complex set of forces has hindered an economic rebound:

  • Upstate New York communities have experienced significant losses of employment and retail expenditures because of military downsizing and decreasing defense expenditures;

  • Concentration and downsizing in key sectors of the upstate economy have encouraged the con-centration of certain major employers in urban centers, depriving smaller communities of employ-ment; and

  • Deregulation of key sectors of the economy has led to job concentration in urban centers and higher costs for many upstate residents and businesses.

To reverse the decline of upstate economies and slow the loss of workers and jobs to other regions of the country, the Department of Housing and Urban Development has undertaken the Canal Corridor Initiative (CCI). The Initiative reflects the principles and approach embodied in the federal Empowerment Zone and Enterprise Community program, using federal resources to spur private investment in revenue generating projects in communities along the canal corridor which includes New York’s historic canal system and its inter-connected waterways.

The Canal Corridor Initiative was developed in response to state and local plans for the canal region. The vision behind the Canal Corridor Initiative emphasizes locally initiated efforts and regional synergy, — the encouragement of development within a framework that will maximize benefits to the region as well as individual communities.

The Canal Corridor Initiative was strengthened in 1998 through HUD’s partnership with the U.S. Department of Agriculture (USDA). The HUD/USDA partnership commits the agencies to providing grant and loan resources, as well as expertise, for the benefit of small communities along the Canal Corridor.

The federal resources invested in canal communities are significant. Over the course of the three-year program, HUD has provided $237.3 million in grants and loans to leverage $361.1 million in investment from the private sector and local and state govern-ment for a total investment of $598 million. In addition, USDA has provided $160.2 million in assistance and leveraged $41.5 million for a total investment of $201.5 million. Together, HUD and USDA have provided or leveraged a total investment of $800 million.

This study, prepared by a team of researchers in the Department of City and Regional Planning at Cornell University, reports on the progress of the Initiative and evaluates its potential and realized economic impact on the canal region. Our findings are based on: 1) information on recent use of canal-related tourism facilities and services; 2) a Social Accounting Model, developed by the City and Regional Planning Department; and 3) an evaluation of what is happen-ing “on the ground” through case studies in four communities that have investments in place through the Canal Corridor Initiative.

This preliminary study, the first of two on the Canal Corridor Initiative as an economic development strategy for the canal communities, demonstrates the Initiative’s positive impact on the upstate economies through HUD’s investments. The impact of the program is not just economic, however. Our case studies show that the Initiative has also given new confidence to communities who feel that their needs have been forgotten in an era of national prosperity.

Research Findings

Finding #1 Tourism expenditures in the canal region are rising and have the potential to produce significant economic growth. The Canal Corridor Initiatives investments create the capacity to draw and serve visitors to the region.

Evidence from canal region agencies, hotel taxable sales, and from our case studies all show recent increases in expenditures in canal tourism activities. For example, hotel taxable sales are up 12% in the region; between 1996 and 1998, 10,000 additional boats used a canal lift or passed under a lift bridge; and the National Park Service reports an 18.5% increase at their New York sites, many of which are adjacent to the canal. Our case studies provide further evidence of this rise in tourism activity and its beneficial implications for canal region communities.

Investments through the Canal Corridor Initiative are creating the infrastructure and services to draw visitors, and to serve them (with restaurants, boat tours etc.) when they arrive in the region. With capital improvements in both public and private enterprises, jobs are created to meet the needs of the increasing number of visitors to the region and tourists.

Finding #2 Based on a conservative estimate of a 5% increase in tourism sectors in the region, HUD’s investment in the Canal Corridor is likely to yield over 17,000 additional jobs and a $447 million increase in state and local revenues.

Although, at this time, we cannot predict with full accuracy how much tourist expenditures will increase throughout the canal corridor communities, we have strong indications from our case studies and other research that the increases within tourism sectors will be at least 5 %. A much larger job impact is likely if the increases in tourism sectors induced by CCI investments reach the 5% range.

This finding is based on our use of a Social Accounting Matrix (SAM), an internationally recognized tool used to trace how expenditures move through various sectors of an economy. With the development of better databases at the county level, regional SAMs can be used to analyze and predict economic trends in regional economies such as that of the canal region.

The Social Accounting approach provides information on two key impacts of investment through the Canal Corridor Initiative. First it indicates that the total number of jobs induced by the investments is likely to be considerably greater than the number of jobs predicted by applicants when applying for HUD loans and grants through the Canal Corridor Initiative.

The results of the Cornell Social Accounting Matrix model indicate that the total of new jobs generated in the 32 counties impacted by CCI investment in tourism-related facilities and services will be significant.

With a 5% increase in tourist expenditures, approximately 17,000 additional jobs will be created in tourism related industries.

There will also be significant revenue increases for upstate communities, strengthening their overall economic development potential. With a 5% increase in tourist expenditures in the canal corridor communities, annual revenues to state and local government will increase by $447 million. In addition, there will be benefits to federal government revenues.

We used the SAM only to predict the additional impact on jobs in the region’s tourism sectors (retail, hotels, restaurants, recreation services, water and passenger transportation) further job increases can be expected in other sectors as a result of the expendi-tures of people holding tourism jobs. The model enables us to better estimate jobs produced by the secondary expenditures of these direct jobholders and thus, to get a better fix on the total job impact in the region. Further specification of the model for our next research report will enable us to extend our analysis of the impact of CCI investments on the region.

Finding #3 Canal Corridor Initiative investments have provided a flexible tool that has functioned as a catalyst for economic development in canal corridor communities. The Initiative’s overall framework has encouraged regional collaboration and contributed to broader economic development goals, including the retention of manufacturing jobs.

This finding is based on a set of four case studies of communities, which have implemented Canal Corridor Initiative investments — Little Falls, The City of Fulton, Oswego, and Lockport. As our case studies indicate, all of these cities have serious economic development needs — they have lost both jobs and the working age portion of their population during the 1990s.

The communities selected for case studies are, in many respects,” best practice” cases. They are places with a history of seeing the canal as a potential resource for economic revitalization and with the leadership and organizational capacity to respond to the possibilities offered by the Canal Corridor Initia-tive. As a consequence, they have been able to move more rapidly to realize some of their development goals. The case studies were also chosen because they represent different development objectives and different sets of development problems. As a group, they illustrate the full range of the strategies used in 32 counties with projects supported by the Canal Corridor Initiative.

Findings from the case studies indicate some common themes:

  • The Canal Corridor Initiative has functioned as a catalyst for development. Although these canal communities had plans for development, they needed support to turn their plans into reality.

    The Canal Corridor Initiative has helped move long delayed plans “off the shelf” and toward realization. In addition, local officials were able to think more broadly about their development agenda, including how to utilize improvements in public facilities and services to attract and retain manufacturing jobs.

    From Little Falls:

    “The projects would not have happened without CCI funding. A lack of funding commitment from the City has limited the scope of projects in the past or prevented them. Except in emergency situations, it is difficult to get the City to address its infrastructure needs, particularly in the Central Business District”

    From The City of Fulton:

    “If CCI had not come along this (development) would not have happened. We would have lost Sealright (a Fulton manufacturer). You would have had to turn off the lights. CCI helped us pull together a package that saved manufacturing jobs and led to downtown revitalization.”

    From Lockport:

    “Without CCI our commercial projects wouldn’t have happened or would have occurred too slowly or at an insufficient size to really make a difference. This is important because our goal with these projects is to create a critical mass of activities that keep tourists in Lockport for longer stays.”

  • The Canal Corridor Initiative has proved to be flexible and adaptable to local needs.

    Our case studies indicated that one of the most valued dimensions of CCI was its responsiveness to local needs and respect for the assessment of local officials regarding their development priorities.

    From Little Falls:

    “This is not a typical we-think-you-should-do-this-and- here’s-the-money-to-do-it program. They’ve been receptive and very good about being flexible and allowing creativity.”

  • The Canal Corridor Initiative has created a sense of regional synergy that stretches across the corridor.

    The Canal Corridor Initiative fostered a regional development vision that incorporated efforts across communities. This vision helped sell the economic development investments locally and created the sense of being part of an effort that would have a much greater impact because of its regional scope.

    From Oswego:

    “This is one thread that ties us all together...this is a natural corridor”.

    From The City of Fulton:

    “The big difference here was that someone thought enough about the canal to make a comprehensive plan possible. It made our City proposal a more valued project. We got everybody to buy —in because it wasn’t just Fulton getting money to straighten its streets.”

  • The Canal Corridor Initiative has made upstate canal communities visible as good places to live and do business.

    The Canal Corridor Initiative has created a feeling of excitement and forward motion in communities that felt their economic development needs were being neglected. All of the case study communities see the opportunity to turn canal-focused improvements into a broader revitalization agenda.

    From the City of Fulton:

    “People are seeing hustle and bustle in the down-town. We love to see the UPS truck double-parked, making deliveries!”

    RECOMMENDATIONS FOR FUTURE DEVELOPMENT

    The Need For Expanded Regional Partnerships

    However successful the Canal Corridor Initiative has been, it will only reach its full potential if a full range of public and private sector partners is engaged to contribute to rebuilding the region’s economic vitality.

    Our interviews with community representatives and other informants knowledgeable about the upstate economy indicate how the positive contribution of the Canal Corridor Initiative could be enhanced by the active commitment of upstate resources, includ-ing colleges and universities, foundations, and business groups. These organizations could magnify the revenue-generating investment by providing technical assistance, regional planning and coordina-tion and professional expertise.

    As with the Canal Corridor Initiative, these efforts should be rooted in local agendas and build regional cooperative action from the locality outward. Particular areas that would benefit from the involve-ment of local and regional institutions include:

  • The Coordination and Professionalization of Heritage Tourism Sites

    Heritage and cultural tourism are key to the develop-ment plans of many canal communities. Museums are popping up everywhere. There is a need for local communities to coordinate their efforts to enhance the overall impact of individual projects.

  • Building Public and Private Development Capacity

    Local capacity needs to be built in the private sector to develop entrepreneurial skills (such as business plan preparation) and in the public sector to integrate land use and economic development plans and to deal effectively with complex loan applications.

  • Efforts to Relate Tourism Development to a Broader Economic Development Plan for Upstate New York

    CCI is playing a critical role in Upstate New York’s movement toward a more prosperous future. For that future to be assured, a broadened regional economic development partnership is required. As the Mayor of the City of Fulton put it, “We can do something about job creation if we put our heads together collectively.”

    ***

    This report is the first of two to be prepared by the Department of City and Regional Planning on the impact of the Canal Corridor Initiative and its role in upstate New York economic development. A second report will be issued in February 2000. The second report will include: 1) a revised Social Accounting Matrix utilizing more recent data on the canal region counties; 2) an expanded set of case studies of communities implementing Canal Corridor Initiative investments; 3) expansion of the model to include USDA investments; and 4) a more thorough examina-tion of how institutions in the canal region can support economic development efforts.

    Content Archived: January 20, 2009

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