Slipped LISC: Is Any Development Good for Urban America?

By Guest Commentator Amy Kedron
Posted on June 27, 2008

To be sure, many urban neighborhoods are in dire need of development resources. But there is a difference between "economic development" and "community economic development." The former is often driven by private interests, primarily for private gain; the latter is community-driven and aims to empower communities.

The Local Initiatives Support Corporation [1] (LISC) has long tried to walk the fine line between private interest and public benefit, as it has helped provide billions of dollars to low income communities. But at a recent Urban Forum [2] I attended in April, LISC's invited speakers – and LISC itself – appeared to be veering far from community development.

LISC is an economic development intermediary whose stated purpose is "to transform distressed neighborhoods into healthy and sustainable communities of choice and opportunity, good places to work, do business and raise children." It mobilizes the philanthropic dollars of some of the largest corporations in America to develop affordable housing, retail districts, charter schools and even football fields. Its corporate sponsors, such as State Farm Insurance, the Walton Family Foundation, the National Football League, and Citigroup, have donated over $7.8 billion over the past 25 years.

When LISC began almost thirty years ago, its primary emphasis was on affordable housing; today its sights are set on retail, of the big box variety, as the Forum’s keynote speakers Colvin Grannum and Harvey Gutman discussed at great length.

Colvin Grannum is the president of Brooklyn's Bedford Stuyvesant Restoration Corporation [3] (BSRC), the first community development corporation in the nation. (He has also served on the board of LISC since 2001.) According to the 2000 Census nearly one-third of Bed-Stuy families in the largely African-American community lived in poverty.

Grannum began his presentation emphasizing the importance of local business ownership. This is, of course, a key principle of organizations like the Business Alliance for Local Living Economies [4] (BALLE). But Grannum's speech left out a pivotal word that BALLE emphasizes – independence.

Local economies advocates understand how a franchise and an independently-owned business can have vastly different economic and community impacts. Economic multiplier studies repeatedly demonstrate that independent retailers return over three times more money to their communities than national retailers. Unlike large corporations, privately-held, independent businesses are not beholden to shareholders and therefore have a greater capacity to hear and respond to the needs of their communities; they also enhance an area's sense of place. For example, in a recent New York Times [5] blog article entitled, "What Do You Miss Most about Old New York? [6]," online readers repeatedly reminisced about their favorite "mom and pop" business.

Grannum's focus was different. He argued that franchise-models were the ideal formulas for urban renaissance. To drive this home Grannum highlighted the BSRC's main LISC-sponsored success stories, the new presence of a Duane Reade pharmacy and an Applebee's Bar and Grill in the neighborhood. Duane Reade began in 1960 and now with nearly 250 outlets is the largest drug store chain in New York City. It went public in 1998 and recorded $1.6 billion in sales in 2006. In 2007, Applebee's International Incorporated was sold to IHOP Corporation for $2.1 billion. IHOP Corporation now has more than 3,250 restaurants and is the largest full-service restaurant company in the world.

Conference leaders often referred to bringing in large retailers like these as economic "anchors" of otherwise independent districts. But these are anchors that can sink the ship. Writers such as Stacy Mitchell [7] have detailed [8] how big businesses often get big by cannibalizing smaller ones that are unable to attract the subsidies and support that give mega-retailers the competitive edge. LISC endorsement of large over small-scale development can be seen as undermining the competitiveness of homegrown neighborhood businesses. Major funding intermediaries like LISC should be asked to quantify the community impact of large-scale retail before they can deem such development a success.

The Urban Forum's second speaker, Harvey Gutman, similarly championed large-scale business development in New York neighborhood that had traditionally hosted smaller-scale shops. Gutman is the former Senior Vice President of Retail Development for Pathmark [9], the twelfth-largest supermarket chain nation-wide.

Gutman is best known for bringing a Pathmark supermarket to Harlem in 1999. It was the first chain supermarket to open in Harlem in three decades and the first major commercial development completed in the neighborhood since the riots of the 1960s. When the $15 million outlet opened on Harlem's 125th Street, local journalists questioned whether independents already rooted in the community would be able to compete. Pathmark was about eight times the size of the average supermarket there. Ethnically-owned, independent markets in East Harlem launched a major campaign against the store, questioning why the city would subsidize a nonlocal chain over local stores that had served the community throughout the previous decades.

Someone needed to remind Gutman that independent retail brings a key element to urban centers that has been deficient for decades – ownership. When a chain store opens it may create minimum-wage jobs, but when an independent store opens it creates community owned and controlled assets that have the potential to stabilize neighborhoods as they are inherited from one generation to the next. Culturally rich cities like Harlem and Bed-Stuy are resource-poor today at least partly because community development institutions routinely fail to nurture community ownership.

It's hard not to have some sympathy for urban communities that want to have the same retail opportunities as the suburbs. Harlem had gone without a chain supermarket for so long that when Pathmark opened Governor Pataki held a press conference there. Yet these long-neglected communities should beware corporate giants bearing gifts.

While these two keynotes may not capture the full scope of LISC priorities, they highlight the best thinking LISC had to offer for the coming year. What these perspectives lack is the recognition that community and entrepreneurial empowerment can and should be at the heart of local economic development efforts. Instead, LISC has championed an approach that focuses on retail recruitment of nonlocal "anchors" rather than strengthening those locally-owned businesses truly anchored to the culture, economy and long-term well-being of their communities.

Ultimately, really beneficial development requires diverse, independent businesses that build up entrepreneurship, capital, and purchasing power in a community. Urban leaders, including those at LISC, need to reexamine their development priorities and who exactly will benefit.

Amy Kedron is the founding director of Buffalo First [10], a BALLE network based in Buffalo, NY. She is writing a book on local economies and urban community development.