Part One: The State of America's Cities

These leaders and their constituents are showing a growing recognition of simple realities. The key problems and opportunities of our day -- crime, pollution, untapped markets, workforce development, welfare reform, infrastructure improvement, and more -- do not respect jurisdictional boundaries. City and county leaders, regional councils, regional business roundtables, faith-based metropolitan alliances, and other actors are not just finding common ground -- they are fashioning solutions that break the mold. From Treasure Valley in Idaho to metro St. Louis, from Eastward Ho! in South Florida to San Diego and Central New York State, leaders in the new regionalism are reaching across city and county lines to form partnerships that strengthen metro economies and enhance livability.

Investing in central cities is the key to creating competitive metropolitan economies. Metro regions are the growth engines of the economy in this era of heightened global competition and interdependence. America's regional economies can only compete effectively if they are supported by cities healthy at their core. In an era of high mobility, low transportation and information costs, and fierce global competition, a metropolitan region without a healthy urban core finds itself at a severe competitive disadvantage. In a global economy, firms choose among regions -- and the health of the central city is a key factor in deciding which region is best. Even firms that choose to relocate to the suburbs will choose areas surrounding a vibrant central city.

The recent U.S. Conference of Mayors survey dramatizes this new willingness to cooperate. More than 96 percent of officials from both central city and suburban jurisdictions (cities and counties) agreed or strongly agreed that "the long-term health and vitality of our region depends on greater cooperation among cities and suburbs," and more than 95 percent of both groups of officials agreed or strongly agreed that "my city's/county's long-term interests are tied to the future of the surrounding region." Likewise, more than 96 percent of both groups of officials agreed or strongly agreed that "there should be more urban-suburban and central city-county cooperation," and more than 91 percent of officials in both groups agreed or strongly agreed that "the problems of cities and suburbs are closely interrelated in our region." And more than 81 percent of both groups of officials agreed or strongly agreed that "the competitiveness of our region is directly tied to the economic strength of our urban core."

The officials surveyed also agreed on the appropriate roles for different players in bringing about this regional cooperation. More than 95 percent of both groups of officials agreed or strongly agreed that "business leadership is important to building more city-suburb cooperation in our region;" more than 87 percent of both groups agreed or strongly agreed that "the Federal Government should encourage and create incentives for city-suburb and central city-county cooperation;" and more than 84 percent agreed or strongly agreed that "nonprofit organizations, including faith- and community-based groups, are important to building more cooperation between cities and suburbs in our region."

Central city and suburban officials also generally agreed on the types of policies that would help to promote cooperation on the new common agenda. For example, more than 93 percent of officials in both areas agreed that "we support policies that encourage the redevelopment of core cities in our region." More than 93 percent agreed that "expanding housing and homeownership opportunities in the urban core of our region would benefit the entire region," and 98 percent in both areas agreed that "it is a prudent strategy for the Nation to redevelop urban brownfields as an alternative to developing previously undeveloped greenfields."

More than 90 percent of both central city and suburban officials agreed that "we need to expand and improve public transit in our region to help reduce congestion and fight the negative effects of sprawl," and more than 87 percent agreed that "sprawling patterns of development are a significant national challenge." Finally, more than 84 percent of officials from both areas agreed that, "compared to five years ago, we are working more closely with neighboring jurisdictions on metropolitan growth issues," and virtually all -- 97 percent from both areas -- said that they believed that the major challenges facing their own cities are regional challenges, encompassing surrounding communities as well as their own jurisdiction.

Central cities have untapped markets -- for labor and retail and land development -- that can help the Nation continue its economic growth and can serve as an alternative to the uncontrolled growth that strains suburban communities. A decade ago, Wall Street investors eagerly looked to emerging markets overseas to generate high returns on their capital. Today, America's own central cities are the emerging markets of the 21st century. These new domestic markets and their available labor force are right here, with developable land close to supply lines. Successful urban firms recognize and tap into these competitive assets.

However, for the most part, they are yet undiscovered territory for many businesses. "The largest pools of untapped investment opportunities and new customers are not beyond our shores," President Clinton declared earlier this year. "They're in our backyard." Investing in the untapped markets of central cities and implementing regional solutions -- at the local level -- to address regional problems are key to creating competitive metro engines and livable communities for the 21st century.

Central cities have a pool of more than 4 million working men and women who are available to continue the expansion of our economy without reigniting inflation. Some economists are becoming concerned that labor shortages could curtail the Nation's record peacetime expansion by fueling inflation as demand for labor collides with a limited labor supply and forces wages up. Fortunately, urban areas have the untapped labor pools needed to continue our economic growth. More than 2.3 million of these workers are unemployed but actively seeking work. Another 550,000 have stopped looking for jobs because they are discouraged or because problems with daycare, transportation, or skill levels prevent them from taking a job. In addition, there are an estimated 1.5 million workers not in permanent jobs and therefore marginally attached to the labor force.³³

Central cities offer large untapped consumer markets that represent new profit opportunities for businesses.Inner cities have enormous purchasing power, but many urban neighborhoods are "under-retailed" residents shop in the suburbs where the selections are wider and the bargains are better. The retail purchasing power of all central city residents has been conservatively estimated at $665 billion. Even households in the most economically distressed urban neighborhoods have $85 billion in buying power -- more than the total purchasing power of Mexico.

Central cities and older suburbs have a significant supply of land that is well-served by infrastructure, strategically located, and available for new development. There are 5 million acres of abandoned industrial sites in our Nation's cities -- roughly the same amount of land occupied by 60 of our largest cities. If these sites were filled with residential neighborhoods, they could house nearly 45 million people. Alternatively, they could accommodate hundreds of millions of square feet of new stores, businesses, offices, and other commercial and industrial establishments. While many of the developable sites are brownfields, cities, states, and the Federal government are pursuing innovative strategies to clean up these sites, thereby leveling the playing field so that cities can absorb more growth and curtail suburban sprawl.

The U.S. Conference of Mayors' survey of city and county officials underscores the significance of the untapped labor, retail, and land markets in the central cities. For example, 92 percent of central city officials agreed or strongly agreed that "my city has neighborhoods that have significant untapped economic potential." Eighty percent of central city officials agreed or strongly agreed that "my city has a significant available workforce of unemployed or underemployed persons;" 82 percent agreed or strongly agreed that "my city is home to many consumers who would make more retail purchases in their communities if there were more retail outlets near their homes;" and 88 percent agreed or strongly agreed that "my city has available land for new or expanded retail or other commercial development."

The message from this survey could hardly be more clear: central city leaders strongly agree that they have untapped labor, retail, and land markets that can fuel continued growth, while suburban leaders are concerned about the strains of rapid, unplanned growth.

As urban conditions improve, cities' enormous assets -- infrastructure, public transit, strategic location, cultural amenities, colleges and universities, available labor force, retail markets, and developable land -- are ready to be put to work. These untapped urban markets can provide a significant source of national economic and social growth in the next century.