Prepared Remarks of Secretary Shaun Donovan at the Detroit Economic Club: "An Urban Economic Policy for the 21st Century"

Monday, July 11, 2011

Thank you for that introduction, Mayor Bing. It's great to be back in Detroit -- and to speak before the Detroit Economic Club, which has provided a critical platform for ideas about America's economy for nearly eight decades. I'm proud to be a part of that legacy -- and to see so many friends and colleagues.

Today, I want to discuss with you the Obama Administration's approach to urban policy -- how over these last two-and-a-half years we've done things in a new way, the reason we've done things differently and how this new approach supports cities like Detroit that America needs to create jobs and win the future.

Why Cities and Regions Are Essential to Winning the Future

But to understand the path forward for our cities, we need to understand their past -- what they meant to the American economy of the last century, what they mean to the economy of this century, and what they've needed to make that transformation.

I'd like to begin with a story that provides us some perspective.

It's about a one-industry town, a town that was an economic powerhouse for decades. And because of shifting global headwinds and changing demands this town found its largest employer reeling, going from more than 100,000 workers at its peak to less than 39,000 inside of four years.

It was the worst unemployment crisis any major city had seen since the Great Depression. Private investment had evaporated, and there were few signs of it coming back.

Hopes had so dimmed that two local realtors whose own families' fates depended on the vibrancy of the city's economy rented a billboard for $160.

Placing it on a road heading out of town as drivers left for the suburbs, the billboard read simply:

"Will the last person leaving Seattle turn out the lights?"

Forty years later, we know that one-industry aerospace town, which had relied on Boeing for its economic health, rebounded from the 60,000 jobs that company lost during those four years -- transforming into the home of Microsoft, Amazon and Starbucks, a community with a transportation system that gives virtually every family in the region access to jobs and opportunity.

Seattle wasn't alone in this resurgence.

Pittsburgh, long a giant in the steel industry, watched as its largest mill, the Homestead Works, shuttered its doors in 1984.

Today, Pittsburgh is considered the most livable city in America -- its economy built on the backbone of education and health care.

Boston endured a brutal transition that began in the 1960s and lasted through much of the following decade -- as it went from being the hub of New England's shoe and textile business to a global center of financial management, education, and advanced electronics and a place that is attracting new residents to the region.

These communities diversified their economies.

They educated their workforces and exported goods.

They committed to broadly shared prosperity.

And they worked closely with new partners -- the private sector, and the "Third Sector" of philanthropy and non-profits.

We in the Obama administration learned from this history.

We have joined the Federal government with local partners in taking a pragmatic, regional approach to problem solving that supports local leadership, local resources, and local innovation.

Indeed, as our communities' economies become ever more interdependent, today the partners that are growing ever more important are those in the regions where we live. Regional neighbors matter to everything from bond ratings to the ability to attract businesses, workers and families.

China doesn't distinguish between Detroit and Troy -- they see a single region, a single economy, a single competitor.

They know that our metropolitan areas are where 85 percent of jobs are located and more than 8-in-10 residents live.

They know that it's our metros that produce over 80 percent of the nation's patents and exports, and where 90 cents out of every dollar America produces come from.

The anchors of these places are America's cities -- and our ability to win the future depends on them.

We need cities.

But as we've worked these last 30 months with local communities across the country, the question on President Obama's mind and mine is:

What do they need? Specifically, what do cities need that only the Federal government can provide?

In a crisis like the one we've been through, cities need a Federal government that invests in their future -- and the Recovery Act has done that on an unprecedented scale.

But they also need a different kind of partner.

In the last century, in the wake of an earlier urban crisis, all too often, federalism meant bureaucrats in Washington wiping out whole neighborhoods based not on what that community needed--not on what regional leaders said they needed--but on what a plan book said these places needed.

Under Urban Renewal, it was as if neighborhoods were a blank slate. A tabula rasa.

As Ron Sims, the Deputy Secretary at HUD, who was one of the chief architects of Seattle's turnaround during his dozen years as King County Executive, has said time and again:

It wasn't that Seattle couldn't have used a federal partner -just that it didn't want the one being offered to them.

It was the failure of that approach that led to the federal role withering, leaving cities and regions on their own to respond -- which in turn meant that the examples of a Seattle, a Pittsburgh or a Boston reinventing themselves became all too rare.

It's for that reason that the Obama Administration's effort to win the future has relied on a new kind of urban policy that envisions a new kind of federal partner -- one that breaks from the past and recognizes that the old ways of one-size-fits-all and the failure to allow for local flexibility just won't do.

Not with all the challenges America faces today.

In world where flexible workplaces win...in a world where flexible minds win...and in a world where flexible economies win, you need a flexible, locally responsive, federal partner.

That is why the Obama Administration has focused not only on seizing this economic moment to save our cities and metros from economic collapse, but to build the platform for 21st century urban policy in these places.

And we've done this by strengthening the four key pillars of America's cities to respond to local needs and local markets: people, places, the rules of the road, and local leaders and institutions.

People: Investing in People's Skills

The first pillar is the people that make up a city's workforce and drive its economy.

As we've moved from an industrial economy to a knowledge-based economy, we see that the most successful places are those with high-skilled workers. Those people--not raw materials--are now the most important economic asset any city has.

And if we have learned anything over the past twenty years it is that our people must be prepared for a lifetime of economic change and learning. The foundation to responding to this reality is to ensure basic educational skill development early and well.

That's why, to ensure children could continue to learn and acquire those vital skills during the Great Recession, the Administration prevented mass layoffs of teachers through the Recovery Act.

And it's why we have invested federal funding that encourages endangered local school systems to begin traveling the long road toward excellence -- giving teachers and principals the tools they needed to ensure they are preparing children to join a 21st century workforce through Race to the Top, through the cradle-to-career approach to lifetime learning supported by Promise Neighborhoods and by bringing these innovations to efforts like Head Start through the Early Learning Challenge.

And that's why, when we acted in a moment of crisis to save the Auto Industry from the brink of collapse, we didn't only help this industry retool their business models to better meet the challenges of the 21st century marketplace.

By providing the training workers needed to compete in that marketplace that was responsive to community needs and investing $300 million in new, more fuel-efficient vehicles for the federal fleet, we also reignited a historic economic engine in this region, and trained a workforce with the skills to sustain it.

People: Investing in Innovation

To support the new and innovative industries that will employ these newly-skilled workers and drive economic growth in the 21st century, we've also helped foster regional innovation clusters that capitalize on the density of human capital.

This community is no stranger to the idea that concentrations of firms and industries that do business with each other have common needs for talent, technology, and infrastructure that can create a virtuous cycle of investment and talent attraction. That model, developed through the auto industry here in the Midwest, provided the blueprint for regional clusters from Cambridge, Massachusetts to Silicon Valley.

And with leadership from the private sector, Detroit is at the forefront once again. Indeed, because of the investment of CompUWare and Quicken Loans, and support from Wayne State University and Governor Snyder to forge business incubators like TechTown and Ann Arbor Spark Detroit has become the nation's fastest growing tech job market.

Combining this new approach to supporting product innovation with investments through the Recovery Act has helped America become a global leader in advanced vehicle battery manufacturing.

Where two years ago, the United States had only two factories manufacturing them, by next year 30 factories will be online and they will be able to satisfy demand for 20 percent of the global market -- and by 2015, it will expand to 40 percent.

Places: Stabilizing and Reinvigorating Neighborhoods

The second pillar of the Administration's urban economic policy is to support the neighborhoods and places that people call home, the character of its buildings and streets and the connections between them.

Just as strong regions are anchored by strong cities, strong cities are built on strong and resilient neighborhoods -- good places to live, run a business, and raise a family.

In the 20th century industrial economy, people followed companies. In the 21st century where capital is mobile, companies follow people that want to move to vibrant neighborhoods that attract knowledge and innovation.

And when the New York Times is writing articles as they did last week about enterprising artists starting small businesses and "hipsters" hosting rooftop parties here in Detroit, about young people leaving Seattle to move to downtown Detroit--that compares the scene to Berlin and "the early days of TriBeCa"--you know that something's brewing.

All that's missing, Mr. Mayor, is you getting a tattoo and a piercing.

Now, of course, for these synergies to be effective, these places have to be connected to one another.

That's why Henry Ford Medical Center, the Detroit Medical Center, and Wayne State University are partnering to revitalize Woodward Avenue with Recovery Dollars.

It's why private investors have committed to leveraging the Department of Transportation investment to develop a light rail corridor.

And it's why, as part of the President's commitment to rebuilding the nation's infrastructure through the Recovery Act, the High Speed Rail network will connect the New Center neighborhood where Mayor Bing and I spoke just this morning to the Midwest regional economy.

Of course, vibrancy also requires a healthy local housing market. In the crisis we experienced, foreclosures were decimating neighborhoods. That's why we invested $7 billion in Neighborhood Stabilization funds to help turn foreclosed homes from eyesores into assets.

And they've done more than just help these communities recover from the foreclosure crisis.

As Mayor Bing has shown, Neighborhood Stabilization has helped places that have faced longer-term challenges and house price declines fundamentally rethink the way they use land to compete. Indeed, using these tools, Detroit is a third of the way through the 10,000 homes he's committed to razing.

And speaking of our most challenged neighborhoods, cities can't compete and America can't win the race to educate our kids with 20 percent of our children growing up in poverty -- with productivity, health, and public safety costing $500 billion each year, 4 percent of GDP.

Through the Neighborhood Revitalization Initiative, we have worked in a groundbreaking way across agencies, employing innovative tools like Choice Neighborhoods and Promise Neighborhoods to transform distressed neighborhoods into places with the affordable housing, good schools and safe streets that are the hallmarks of every vital urban economy.

Aligning the Federal Approach with Local Rules of the Road

The third pillar of the Administration's approach to urban economic policy is better aligning the federal approach with local rules of the road -- the laws and regulations that govern our cities' economic activity.

Mobility of capital and people means in the 21st century cities aren't just competing against their regional neighbors. They face competitors from across the country and the globe.

A big part of what allows cities to win that competition and collaborate with other places that share an economic future is their regulatory structures, from taxes to land use. That is why, for instance, Wayne County Executive Bob Ficano has worked with nine municipalities to fast-track development surrounding the airport.

Supporting that kind of leadership is one reason President Obama has ordered a government-wide effort to cut through the red tape by streamlining rules and regulations that affects everyone from regional auto parts suppliers to local boards of education.

That's why the President supports fundamental corporate tax reform that closes narrow, industry-specific loopholes, and lowers incremental tax rates.

Simplicity, transparency, responsiveness to market conditions, and fairness are essential to a competitive 21st century tax code. And the cost of complying with federal rules and the federal tax code should never be a barrier to investing in the future of our families, our businesses or our cities.

Of course, when it comes to the way cities manage transportation, building and land use, it isn't always federal barriers that get in the way, but often that every community in a region has a different set of rules and codes.

We've forged a historic inter-agency Partnership for Sustainable Communities to help align housing and transportation investments, so that they can be responsive to the needs of regional economies.

We know how important these tools are to regenerating regions -- particularly those like Michigan which rely on integrated supply chains that cross national borders and are essential to meeting the President's charge to double U.S. exports over the next five years.

That is why we awarded a grant to help Detroit Metro undertake a new wave of transportation zoning, building code, and land use reform.

While this grant has reminded us how challenging cooperation can be at the regional and inter-jurisdictional level, recent efforts to build the Riverwalk and to reform the Water Board show that with the right leadership and capacity, these challenges can be met.

And when they are met, this Administration wants to be the kind of partner that comes to the table with resources that reward and leverage those reforms, making real gains possible.

Supporting Local Leadership and Institutions

This brings us to the fourth and final pillar of the Administration's approach to urban economic policy: not only supporting local leaders but reinforcing the capacity of the institutions they lead.

Of all the elements I've described that comprise a city--its people, its places, its own rules of the road--the ability to support leaders and the capacity of their institutions is not only the most fundamental, because it impacts all the others -- but also the one Washington has traditionally gotten the most wrong.

So many urban policies of past have failed -- either because inflexible federal policies either ignored or worked against local leadership and institutions or because they didn't take into account the unique assets of every community. Nor did they account for the capacity of these local institutions.

And while the federal role may have withered in the wake of the Great Society, in the wake of the Great Recession, it has returned -- out of necessity.

But as we've imagined urban policy for 21st century, this Administration recognizes three fundamental things about cities that reflect the lessons of the last century:

First, that every city needs a federal partner that understands that one size doesn't fit all -- and that it never will.

Second, that being a good partner isn't just about seeing problems -- it's also about recognizing opportunities.

And third, that no city can succeed without strong local leadership and institutional capacity -- no matter how big the federal grant or how well crafted the federal policy.

Strong Cities, Strong Communities

While a federal partner that understands the importance of local capacity is important for every city and region in America, it's absolutely essential for those places that were facing long-term structural challenges long before the recession hit.

That is why this week the Obama Administration is launching a "Strong Cities, Strong Communities" pilot initiative in six cities and regions: Memphis, Cleveland, New Orleans, Chester, Pennsylvania, Fresno, California, and here in Detroit.

We chose these cities not simply because they face common challenges -- severe population loss and long-term economic decline, high levels of poverty and unemployment, and low property values and deteriorating infrastructure.

Just as important is the assets they bring -- from anchor institutions, to a comprehensive vision for economic development, to the political leadership and will of regional, city and philanthropic leaders.

For instance, in response to losing the competition with neighboring states to attract relocating businesses, Memphis Mayor AC Wharton built a strong relationship with Shelby County Mayor Mark Luttrell to create the Economic Development Growth Engine --or "EDGE"--which merged seven public offices under a single roof so that they can compete regionally.

Or in the city of Fresno, where Mayor Ashley Swearengin is working to undo the damage that decades of sprawl has inflicted on the city's downtown and workforce, and which now threatens the economy of one of the most productive agricultural counties in the nation.

The pilot is designed to capitalize on these local efforts and assets by strengthening the capacity of local institutions.

And it does so in three fundamental ways:

First, by improving the way Federal government does business.

We can't just go back to the way things worked before. Rather, we need to cut through the red tape by dealing with the overlapping maze of agencies, regulations, and program requirements that are often confusing to local governments.

Second, by providing assistance and support, not mandates.

It's not just about getting out of the way. At this difficult fiscal moment, when we need to do more with less, it's also about helping communities spend the resources they already have better, smarter and more effectively -- and by providing intensive on the ground technical assistance and planning resources tailored to a city's needs, we can help them do that.

Third, by partnering for growth.

Part of doing things differently requires the Federal government to develop critical partnerships with key local and regional stakeholders, from the business and philanthropic communities, to anchor institutions like universities and hospitals, to faith-based institutions and other public, private, and Third Sector leaders.

To the six cities we have chosen, Strong Cities, Strong Communities will deploy Community Solutions Teams that build on local visions, advise local leaders as they make decisions and cut through federal red tape.

Comprised of high level federal officials from various agencies, these teams will be funded from existing agency budgets and will work on-site full time for 1 year, with the possibility of a second, to assist the pilot cities with navigating and harmonizing existing federal programs -- identifying barriers to growth and strategically putting to work millions in federal dollars already awarded to these places.

Let me give you an idea of how this support could work.

I've just described how public and private leadership here in Detroit has taken important steps to make the city a magnet for private investment -- attracting tech start-ups by investing in and around successful stable neighborhoods like Corktown, Midtown, Woodbridge, and Indian Village.

Over the last several months, HUD has been working with the City and the Kresge Foundation to support its Detroit Works project to "right-size" some 6-to-8 core neighborhoods -- to identify areas in which targeted, aligned investments in communities can have the greatest impact. We have also helped streamline accounting procedures, so that existing federal funds can be spent more quickly and more effectively on projects that are ready to move forward.

Members of the Community Solutions Teams will build on that progress to speed other investments such as federal spending on public housing and schools and to ensure they are aligned.

In Cleveland, where the Cleveland and Gund Foundations and the Fund for Our Economic Future are supporting regional economic planning and transformation, one team member will work at the County level to strengthen the alignment of shared city-county workforce services with the broader regional economic agenda, so that programs can work seamlessly across communities and not stop at jurisdictional boundaries.

In New Orleans, the city is working with private, non-profit, and public organizations as part of BioDistrict -- one of the strongest medical and biotech corridors in the country, located in the vicinity of three different public housing developments.

In order to help the city realize the full potential of the BioDistrict, the team will assist the city in creating an economic strategic plan that will coordinate education, workforce development, community colleges, and businesses in an effort to prepare residents for thousands of jobs with this new anchor employer.

The other innovative capacity-building tool that Strong Cities, Strong Communities provides to these six cities is a Fellowship Placement Program.

Funded not by government but philanthropy, with initial seed money from the Rockefeller Foundation, these fellows will "deepen the bench" of these pilot cities to make sure that when the federal teams depart there is capacity and strength within the local government not just to carry on, but to lead.

Nearly 650 people from 42 states applied for the opportunity to be one of 25 fellows at Wayne State University's Detroit Revitalization Fellows Program, which is funded by the Kresge and Hudson-Webber Foundations.

That's the kind of energy this fellowship will tap. By identifying early- to mid-career professionals who not only bring talent and expertise but also a commitment to the city, we hope that the capacity they bring can endure long after their fellowship itself has completed.

Strong Cities, Strong Communities also creates new opportunities for the private sector to lead.

When Mayor Harold Washington reached out to the Chicago business community because the city faced capacity challenges of its own in the 1980s, the business community responded by creating the Civic Consulting Alliance -- recognizing that the best way to protect their investment was through civic engagement.

Today, the Civic Consulting Alliance's $2 million operating budget leverages $12 million in pro-bono professional assistance funded by the private sector to fill the city government's capacity gap.

That's bang for the buck -- and that's what we're hoping to stimulate with Strong Cities, Strong Community's Local Resource Networks.

So many business leaders in this community figured out how to grab hold of their company's futures by changing practices and investing in new processes. As painful as it may have been, you did it because you knew the alternative was far, far worse.

Many of you are also just as committed to the future of this great city. And so, I challenge each of you here today to commit to being a part of Detroit's reinvention and be a founding member of its Local Resource Network.

We've already seen how these connections have helped smaller places like Chester, which partnered with Weidner University to redevelop the city's downtown. A Local Resource Network could spur Weidner to a deeper partnership with Chester to create a regional economic and workforce development plan that taps into the success of neighboring communities like Philadelphia.

Indeed, while the most intensive capacity-building efforts of Strong Cities, Strong Communities will be done in these six cities, we are taking steps to ensure that places that share these challenges of economic and civic transition can benefit from its capacity-building tools and partnerships.

While Local Resource Networks would help cities catalyze private sector engagement, Strong Cities, Strong Communities' National Resource Network effort would act as a "one-stop-shop" for technical assistance that could be provided to local governments across the nation.

Instead of providing direct financial assistance, the goal of the National Resource Network will be to convene groups of national experts with wide-ranging skills to provide the kind of cutting edge support and counsel cities need to get the biggest bang for the buck out of public and private dollars.

The final component of Strong Cities, Strong Communities is an Economic Challenge, which we designed for localities that have large deficits in their fiscal capacity but aren't as far along as Detroit in developing a comprehensive strategy for their economic future.

Where in the past, we might have seen federal dollars sent to a community with no meaningful plan for how to spend them, the Economic Challenge competition will competitively award six cities and regions funding so that they themselves can hold "X-prize style" competitions that challenge multi-disciplinary teams of experts to help develop and implement a comprehensive, 21st century, globally competitive economic strategy for their region.

This Administration believes Strong Cities, Strong Communities has the potential to be a model for the New Federalism in the 21st century I've described.

And with that new kind of federal partner, we believe cities facing chronic challenges can begin to transform themselves -- not into the one-industry power centers of the past, but into the hubs of the dynamic, diverse, resilient, regional economies America needs to create millions of jobs and win the future.

Believing in Our Institutions Again

For half a century, we've been told our most troubled cities will never come back.

I disagree -- because over these last 30 months, I've seen what is possible when the Federal government partners with local institutions to create results for communities.

And I believe our cities can come back because I believe my own eyes.

As a child, I saw the South Bronx burn -- and I've seen it rebuilt.

These problems weren't solved overnight.

Nor were they solved by government investment alone.

Rather, what began their turnaround was civic investment and civic engagement that put a team in place that could invest the money they had smarter and more effectively.

Building that team for the 21st century is why Governor Snyder and Mayor Bing have asked for our help.

They know that as Detroit goes, so goes Michigan.

And what President Obama knows is that as goes Michigan--and other places that have struggled for too long with chronic challenges--so goes our country's economic future. Wherever we live, we all have an interest in seeing these places become dynamic, healthy and vibrant again.

But really, we have more than an interest -- we also have a responsibility. A responsibility to step up together.

As we launch Strong Cities, Strong Communities, President Obama's charge and mine is to be a different kind of federal partner at the federal level.

Yours is to be a different kind of partner to your hometown -- to approach its success as you have your businesses.

Right now, here in Detroit, we are seeing a sense of hope among regional and state partners like few other times in recent memory -- a sense that maybe, just maybe, this city and communities around is turning the corner.

I believe it's possible.

But it requires your energy, your talents, and your sustained commitment.

Because winning the future isn't about what we plan to do tomorrow.

It's about what we commit to doing today.

It's about what we do right now.

Together, I believe we can -- and with your commitment, I know we will. Thank you.

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