Prepared Remarks of Secretary Shaun Donovan at the Fifth Biennial Reinventing Older Communities Conference

Federal Reserve Bank of Philadelphia
Hyatt Regency Penns Landing, Philadelphia
Thursday, May 10, 2012

Thank you, Milissa -- for that introduction and your leadership with the Federal Reserve here in Philadelphia.

It's a pleasure to join so many representatives from philanthropies, local government, researchers and others.

This is always an important conference -- and this year, it comes at an important moment for our economy.

A moment in which our housing market appears to have turned a corner following the best winter of home sales since the crisis began.

When foreclosure notices are down -- half what they were in the earliest days of President Obama's presidency.

And when our economy has added private sector jobs for 26 straight months, totaling four-and-a-quarter million jobs.

But of course, we know that many homeowners are still struggling to pay their mortgage and we have more work to do to create an economy built to last.

And while this is important for every community -- it's particularly important to those places that were facing challenges long before the recession hit.

So, today I want to talk about the challenges these communities face, and the role the Obama Administration believes they must play in the 21^st century economy.

I want to discuss the new, innovative tools we are providing to help communities--particularly smaller cities and suburbs--collaborate across regions and partners.

And I want to talk about the new kind of federal partnership the Obama Administration is offering to help these places become the strong, resilient communities America needs to create an economy built to last.

A Changing Economy

For many small cities and suburbs, the lifeblood of these places for generations was America's manufacturing base.

For decades, manufacturing has been central not only to the economic success of these places -- but also to the essence of that middle class promise: that if you work hard, you can earn a decent wage, buy a home, send your kids to good school, and maybe put a little money away for retirement.

Yet by the time the President took office, that promise was fading, and the backbone of American manufacturing--our auto industry--was on the verge of collapse.

Some said we should let it die. But with a million jobs at stake, up and down the supply chain, we refused to let that happen. And so President Obama made a bold--and at the time politically unpopular--choice to stand with autoworkers and communities whose economies depend on the industry.

Since that time, the auto industry added a quarter-million jobs. General Motors has retaken the lead as the world's top-selling auto company. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories.

But that decision wasn't just about Detroit. It was also about the hundreds of suppliers across states like Ohio, Indiana and Pennsylvania which employ three out of every four workers in the auto industry.

As a result, hundreds of suppliers in these places have been able to keep their doors open. Thousands of workers there have been able to take home a paycheck on which they can raise a family. Many more in these places have been able to acquire the skills they need to compete in the 21^st century marketplace -- helping America become a global leader in emerging fields like advanced vehicle battery manufacturing.

Indeed, because of Recovery Act investments, in a few years there are going to be hundreds of thousands of new customers in places like Panama, Colombia and South Korea driving cars powered by batteries made in Lancaster, Ohio and Lyon Station, Pennsylvania, and other places across the country.

These efforts remind us that if our old industrial cities are the cities that built America, then these smaller communities are the places upon which those cities' productivity depended -- where many of their workers lived and commuted from and where many industries vital to their future were located.

But it also highlights a broader point about our changing economy.

Many of these places had begun losing industry long before the most recent economic crisis.

Like many older central cities, smaller communities were left to face severe population loss and long-term economic decline, high levels of poverty and unemployment, low property values and deteriorating infrastructure. And like larger cities, their declining tax bases left a lack of capacity at the local level to deal with these challenges.

At the same time, smaller cities and suburbs found themselves at the mercy of an additional set of challenges beyond their control.

For instance, as recent as a decade ago, most of the poor in our metros lived in cities. But over the past decade, that began to change -- with poverty growing almost five times faster in the suburbs than cities.

In fact, today the number of poor people living in our suburbs outnumbers those in our cities by a million-and-a-half.

Nor did these places have the infrastructure--from tools to fight homelessness and create affordable housing, to strategies to spur economic development--that larger cities historically have used to fight poverty and create jobs.

As a result, 20 percent of kids in America live in poverty today--costing $500 billion, 4 percent of GDP, each year--with more and more of them living not in urban cores but small cities and suburbs.

Despite these deepening challenges, the study you heard about yesterday from the Boston Fed demonstrates that some places have pushed back.

Places like Grand Rapids, Michigan and Fort Wayne, Indiana--as well as others like Charlotte, North Carolina and Aurora, Illinois--have demonstrated how smaller cities, after a period of pain and difficulty, can emerge as dynamic, resilient, and successful communities.

And while their responses differed in the details, each of these places followed a similar strategy:

They diversified their economies and developed a coordinated approach to workforce development.

They leveraged private sector investment at a time of scarce public funds.

They engaged new partners and anchor institutions -- from non-profits and philanthropy to universities.

Regional Collaboration -- Sustainable Communities Planning

And they worked at the regional scale.

Indeed, as our communities' economies become ever more interdependent, this audience understands that the partners that are growing ever more important are those in the regions where we live.

From bond ratings to the ability to attract businesses, workers and families, regional neighbors matter.

China doesn't distinguish between Detroit and Troy or Chicago and Aurora -- 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.

Mobility of capital and people means in the 21^st century communities aren't just competing against the community next door. They're facing competitors from across the country and the globe.

And a big part of what allows communities to win that competition and collaborate with other places that share an economic future is their regulatory structures, from taxes to land use.

But 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.

That is why the Obama Administration forged the Partnership for Sustainable Communities. HUD, the Department of Transportation and the Environmental Protection Agency, have over the last three years put $270 million to work to help align housing and transportation investments, so that they can be responsive to the needs of regional economies.

Nearly half of these awards went to small towns and rural places -- and last year's grants leveraged $115 million in additional funding, getting private capital off the sidelines and into our economy.

To see this work in action, all you have to do is drive a few hours west to Pittsburgh, where local partners are using one of these grants to convert vacated industrial land into a new transportation corridor -- providing more families with the chance to live near the economic heart of the city and drive the smart growth Western Pennsylvania needs to compete.

Or look to the East, in New Jersey, where creative local leaders--from the Bloustein School at Rutgers University to the state Office of Planning--are using HUD funds to connect public transportation with job centers in 13 counties.

Not only is that grant bringing down commuting costs for families in distressed cities like Newark and Paterson. But by targeting workforce and economic development initiatives to places like Bayonne, Elizabeth, and the Jersey City waterfront, it also ensures the families and businesses of North Jersey can take advantage of the region's proximity to New York City and the second-largest seaport in the country.

Building Capacity -- Strong Cities Strong Communities

These sustainable communities grants make a broader point about the kind of federal partner our communities need -- particularly in the wake of a crisis that devastated their ability to respond effectively to their unique challenges.

So many urban policies of past have failed -- either because inflexible federal policies 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 local institutions.

Indeed, this Administration recognizes three fundamental things about cities that reflect the lessons of the last century:

First, that every community needs a federal partner that understands that one size doesn't fit all.

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 well crafted the federal policy.

That's why we unveiled the Strong Cities Strong Communities pilot last year.

Bringing together 14 agencies, SC2 is helping six economically and geographically diverse communities and regions--New Orleans, Memphis, Detroit, Chester, Fresno, Northwest Ohio--spend the resources they already have better, smarter and more catalytically.

To help these communities cut through the red tape and deal with the overlapping maze of regulations and program requirements, we have provided two critical tools.

The first is Community Solutions Teams, comprised of highly skilled federal officials who are working on-site full-time to help these cities navigate and harmonize existing federal programs. Together, they're identifying barriers to growth and helping these communities strategically put to work millions in federal dollars already awarded.

Indeed, perhaps the clearest example of how the new approach I'm describing is impacting small cities is 13 short miles from here.

A century ago, Chester, Pennsylvania was central to America's economy. Home to Sun Shipbuilding & Drydock Company, it built tankers for Standard Oil. And in time, those shipyards were converted to auto plants for Ford.

But by the 1950s, like so many places, Chester began losing its once thriving manufacturing industries. And today, while Chester is located in a region with a relatively strong economy, it is very much at the wrong end of a widening gap in the Philadelphia region.

Over the last forty years, Chester population has shrunk by 40 percent and its unemployment rate has tripled. And with a population that is more than 80 percent minority, its poverty rate is nearly three times that of the country.

Despite these challenges, the city has made important progress, creating an Economic Development Authority that has used tools like HOPE VI to rebuild homes and neighborhoods -- in all, attracting more than $1.6 billion in public and private investment over the past 15 years.

Chester is also engaging local academic and medical institutions -- major employers of the kind of skilled, knowledgeable workers the city will need to compete in the 21^st century economy.

To retain and attract this workforce, the Institute for Economic Development, the Crozer-Chester Medical Center and Widener University have created the "Walk to Work Program" which has lifted homeownership in the city by encouraging employers to provide $5,000 to their workers with the city providing an additional $10,000 to cover downpayment and closing costs.

SC2 is helping Mayor Linder build on Chester's progress -- and capitalize on its assets.

Due in part to the efforts of the SC2 team, the Robert Wood Johnson Foundation recently made a $1 million grant for Philabundance's hybrid food pantry project -- which will offer free and sale items to low-income residents in a city where there has not been a grocery store for a decade.

With support from the Department of Transportation and the Small Business Administration, Chester's SC2 team is also helping the city break a decade-long impasse that has prevented the city from capitalizing on its state-of-the-art public transportation center, which has the potential to be a hub for private sector growth.

To help create, as Jeremy Nowak put it yesterday, "a climate of innovation" in these places, the second capacity building tool of SC2 is a Fellowship Placement Program. Funded not by government but philanthropy, the Fellowship program will "deepen the bench" of pilot cities like Chester -- making sure that there is capacity and strength within the local government not just to carry on when the federal teams depart, but to lead.

We just completed the application process for the Fellowship Program -- and will be announcing selected fellows in July. And I want to thank the Rockefeller Foundation for their $2.5 million gift to HUD that helps fund it, as well as the German Marshall Fund for providing the talent and expertise to manage it.

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 what we're hoping to stimulate with Strong Cities, Strong Community's Local Resource Networks -- and they don't just have to be in large cities.

In a place like Chester, a Local Resource Network could spur Widener University to forge an even deeper partnership to create a regional economic and workforce development plan that taps into the success of neighboring communities like Philadelphia.

To ensure these lessons and tools can assist local governments across the nation, SC2 also created a National Resource Network that can act as a "one-stop-shop" for technical assistance. The Network will convene groups of national experts with wide-ranging skills that can provide the kind of cutting edge support and counsel cities need to maximize public and private dollars.

Of course, many localities that have large deficits in their fiscal capacity aren't as far along with respect to developing a comprehensive strategy for their economic future.

For these places, we developed an Economic Challenge -- which will competitively award funding to six additional cities and regions so that they themselves can hold "X-prize style" competitions that challenge multi-disciplinary teams of experts to help develop and implement comprehensive, 21^st century, globally competitive economic strategies for their regions.

And we expect the Economic Development Agency within the Department of Commerce to be opening the competition later this summer.

An Economy Built to Last

While innovative planning and capacity-building tools like Sustainable Communities grants and Strong Cities Strong Communities are essential to stretching dollars further, none of this is to suggest that federal resources are of secondary importance -- particularly those resources that catalyze and leverage the private sector.

Indeed, that is why we have proposed Project Rebuild -- which would build on the success Neighborhood Stabilization has had reversing blight and decline in our hardest-hit communities and creating jobs.

Not only would Project Rebuild create an additional 200,000 jobs -- just as importantly it would provide new opportunities for private sector actors who have been at the table for Neighborhood Stabilization to be full partners in their communities' transformation.

But whether it is direct investments or tools that help communities target those investments, for me--for President Obama--it's simple:

Despite all the challenges they face, communities like Chester aren't folding their tents.

They're planning for the future.

They're collaborating with new partners.

And in the worst fiscal environment of our lifetimes, they're trying to figure out how to get every dollar they can off the sidelines and into their economy.

Just as their challenges weren't created overnight, their challenges won't be solved overnight either -- by a single policy or a single investment.

But these places aren't giving up.

And as this Administration's work shows, we aren't giving up on them.

Not just because it's the right thing to do -- but because we literally can't afford to.

At a moment in which the challenges our country faces are so great, we need all hands on deck.

And as our regions and metros increasingly become hotbeds of innovation, we know that communities like Chester are not only a part of our country's past -- but central to its future.

To the dynamic, diverse, resilient, regional economies America needs to create millions of jobs in the 21^st century.

That's what it is going to take to restore that middle class promise -- and to create an economy built not on phantom profits or shady mortgage practices, but built to last.

An economy where everybody gets a fair shot -- where everybody does their fair share, and where everybody plays by the same rules.

That is what this work is about. And it's why I am so grateful for this opportunity -- and for

everything you do to keep our communities strong. Thank you.

###