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Where There’s Schmoke
His Yale colors showing, Baltimore's chief exec tells tales of two cities
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Business New Haven
11/16/1998
By: BNH
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Kurt L. Schmoke is a graduate of Yale ('71), a Rhodes scholar, Harvard Law graduate and member of the Yale Corporation. Since 1987, he has also been mayor of Baltimore, Maryland, the nation's 15th largest city. He was back in the Elm City November 5 to speak about “Managing America's Cities: The Next Generation of Challenges” as part of the Yale School of Management's Leaders Forum. BNH caught up with Schmoke following his SOM address.
As a member of the Yale Corporation you visit New Haven with some regularity. What do you see when you look at Connecticut, with its highest per-capita income in the nation, but also home to three of the poorest cities in the nation with all the problems we associate with the worst urban areas - poverty, crime, terrible public schools, a vanishing middle class - and no real consensus on how to attack those problems?
I look at town-gown relations in two different ways: I'm a trustee of Yale, so I look at the problems of New Haven from the perspective of this institution. When I'm in Baltimore I'm looking at Johns Hopkins University from a different perspective, and I try to use some of my experiences from one to assist me in the other. I've concluded that there needs to be a close working relationship between the city and the university. We have to be partners, because the quality of life in the city has an impact on Johns Hopkins and its ability to recruit professors, attract students. They can't let the city deteriorate in a fashion that would negatively impact them. We've also tried to be good partners with the [Maryland] state government. There's no clearly defined document that's an urban policy, but there's a recognition that the cities are important to the overall quality of life in the state. It's a tough sell in some other states, I know: I've talked to other mayors who have had a very difficult time with their state legislatures. People kind of want them to [survive] on their own; they have kind of a sink-or-swim attitude. Our legislature has generally understood that the city of Baltimore is an important economic entity, and its fate will impact the rest of the state. If the mayors of Hartford, New Haven and Bridgeport are able to convince the governor and the legislature of their importance to the fate of the state, I think they would have a much better time in terms of developing a strong partnership.
They don't have quite as powerful an argument as you had. These are much smaller cities than Baltimore, and their economic importance to the state has declined further than Baltimore's ever did.
But their deterioration has an impact on the economy of the state from a number of standpoints. If you have serious health or housing or crime problems in those three cities, the state ends up paying for those. So it's really an investment for the state to do things, in a preventive and pro-active way, to make sure those cities are healthy. It takes a while to get to that point. But I was really heartened to read recently some of Gov. [John G.] Rowland's statements about what he wanted to do in the coming term. He talked about trying to solve some of the intractable problems in education and the cities. And I thought, gosh, what a great opportunity not just for the mayors and legislators to get together, but for the business community of the three cities to try to work with the governor on some ideas that might improve economic development.
You talked today about partnerships between city governments and the private sector. When you took office in 1987, how did you initiate those?
It was difficult when I first came in because my predecessor in office - he and I didn't get along very well - had had a wonderful relationship with the business community, and he tried to convince them that I wasn't very pro-business. So it was difficult for me in my first year to [forge] strong relationships with the business community. What helped me was having the partners from my law firm serve as ambassadors to the business community and kind of vouch for me. I also started meeting with a handful of business leaders on a monthly basis. Once I started doing that, they could tell others, 'Hey - we can talk to this guy; we can work with him.' It took a while; it wasn't an overnight proposition.
You've attracted many businesses to your city, as well as headquarters for some large non-profits. How is that done, given the high tax burdens on cities?
We have a lot of similarities with New Haven. We have actually lost a lot of jobs; we are losing manufacturing and light industry. Some of it was related to the tax burden, as well as perceptions about safety and the crime problem. Others were simply changes in the economy. Changes in information technology have made a huge difference. People don't have to be downtown any more. Manufacturers have moved some of their operations offshore. And some businesses move away from unions. So what we did as a matter of economic policy, first we made it real clear that our primary focus was business retention - keep what you have, and make sure your economic development agencies were focused on being customer-friendly to the companies that we already had to try to keep them there. Retaining businesses was really our best attraction strategy. When companies locally would say, 'Yes, they cut the red tape; it didn't take long to get permits; they took care of the trash; they helped us with the roads'...That became our best tool for marketing the city and attracting other businesses. Then we looked at areas where we thought we might have a competitive advantage, and one was non-profit organizations. So went after headquarters of major national non-profits that were being squeezed in their costs in other cities. Some we won; some we didn't. We tried to get the Girl Scouts, but [Mayor Rudolph Giuliani] came in and said, 'I want the Girl Scouts,' so he cut them a great deal. But we got Catholic Relief Services and Lutheran World Services and the NAACP. The other thing we did was to look at our strengths and build on them - the strengths with Hopkins, spinning off businesses from their research. And then our Inner Harbor, which is such a wonderful attraction because it's so compact that you're able to go to a convention - we tripled the size of our convention center - only three blocks from the Inner Harbor. So we could make nearly every convention a family experience. If you brought your family you had a very easy, compact area where young people and families could [enjoy themselves].
What about the downside?
Well, we still suffer some of the same sorts of problems as New Haven. We can't annex [our suburbs]; and we know that raising taxes is death: You raise a tax and you just lose more people and more businesses. So we have to be creative.
How successful has Baltimore been in growing entrepreneurial businesses? And how is that best done - do you find them, or build them from raw material?
You have to offer them some incentives. We do have some of these business incubators where small businesses can come in and operate without huge overhead. Also, the federal empowerment zone allows tax credits for businesses which hire employees from the zone. Also we have state enterprise-zone program. But usually to attract a small business or to keep them you have to use all those incentives because one by itself is usually not enough to offset the advantages that a firm would get to go [elsewhere], particularly parking. So we have to offer as many incentives as we possibly can. Our economic-development agency has a private-sector board, and they do a cost-benefit analysis on every proposal that comes in [to determine] whether we will in the long run get more benefits by helping [a particular] firm with this incentive program than we would by not helping them. I mean, some people will come to us and ask for 100-percent financing, ask us to use our federal block grant dollars and give them a year's operating costs. We can't do that. Having the business community involved with our economic-development agency and giving us advice on a project-by-project basis has really helped us a great deal.
Yale's attitude toward technology transfer to the private sector has changed in recent years, and a lot of people in Connecticut are hopeful that Yale research will spawn new companies that will help grow the area's economy. Are those hopes well-placed, or misplaced?
I think it's realistic. It's just that, under the current tax structure, it's only going to benefit the city of New Haven if that happens in Science Park or elsewhere within the city limits.
A lot of us would be happy if some of these bright young minds simply stayed in Connecticut instead of going to California.
We have the exact same problem in Baltimore, because investors in California are always looking for these ideas. Among the things we've tried to do with our economic-development agency is to find out who these professors are and what they're going early, and then working with the state to try to keep those ideas in the city and in the state. The state of Maryland has built an incubator for high-tech firms, and they built it in the city of Baltimore, which helped us a great deal. So this whole idea of Science Park makes a lot of sense - it's just going to take the right entrepreneur to pull it together.
Which is what Science Park has lacked.
If you look around the country at similar efforts, you find that it makes sense for government to put the structure together, but not to run it. You need a genuine entrepreneur who knows about science and technology - and who has a stake in it - to make it work.
New Haven has a redevelopment plan that bears some similarity to Baltimore's in that harbor redevelopment is key to it. Can that kind of strategy work for smaller cities that have never really been major destinations in the past?
It can work, but you gotta be real careful. The Rouse company, which did Baltimore's Inner Harbor, had been invited into other cities [to do similar projects]. In some places it worked like a charm. In other places what they found was that there was a harbor, or water, but no history of people coming to that area. It takes a while to build up that interest, and you've got to make sure that you don't just build a nice facility and then expect people to cross roads that they've never crossed before to get there. I would encourage local leaders to take some time and visit other cities that have tried these projects to see why some things worked in Baltimore and Norfolk [Va.] and didn't work in Toledo. You don't want to build a facility and then be scratching your head when nobody shows up. Also, if you put a facility down there you have to promote it well, or else people will not show up. And it's tough sometimes to get your local legislators to support money for promotion, because you can't necessarily show them return on investment. But if you're going to go into the business of economic development, you have to go the whole way.
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