Is a Top-Down Approach the Best Way to Revitalize Downtown?

The scars of 1950s urban renewal still haunt many American cities. Among them is Richmond, Virginia, where a section of downtown called Navy Hill, at one time a thriving African-American community, was decimated to facilitate the construction of Interstate 95 and, eventually, make way for the Richmond Coliseum.

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An artist’s rendering of the proposed Navy Hill redevelopment, from the project’s website.

Now, Richmond is weighing a controversial project to reinvent Navy Hill in one fell swoop yet again, this time through a partnership with a private developer to do a billion-dollar redevelopment of 10 blocks of city-owned land. The resulting master-planned entertainment district would contain a brand-new stadium and event venue, hotel, food hall, and some 2,500 housing units—funded in large part through tax increment financing (TIF) that would commit a major portion of future property taxes not just from Navy Hill but from a surrounding area eight times as large. Local critics have questioned the expansiveness of the TIF district, and whether Richmond is mortgaging too much of its future on this project.

Strong Towns was invited to submit an op-ed to Richmond Magazine explaining why we think this is a huge gamble with a high opportunity cost—and the city should consider more incremental approaches to achieving the same ends of revitalization and increased wealth. Here it is. The below article was originally published in Richmond Magazine, and is reprinted here with permission.

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Considering Navy Hill

How do you get a world-class urban neighborhood? One approach to this question is to start with an instructive look at existing models. New York City’s Greenwich Village. Washington, D.C.’s Georgetown. The French Quarter of New Orleans. These places are the product of generations of evolution. They embody the collective insight, knowledge and creativity of thousands of hands, not dozens.

A far riskier approach is that of Richmond’s proposed Navy Hill redevelopment: Work with a master developer to reinvent 10 blocks of your city’s core out of whole cloth, aiming for greatness in one fell swoop. You can check a list of priorities du jour along the way. Performance venue? Check. Affordable housing? Check. New transit station? Check.

The top-down, master-plan approach to city building is seductive. But it is also fragile. It depends heavily on the vision of a very small number of individuals and their ability to anticipate how the market and people’s preferences will respond to what they have built over 10, 20, 30 years or more. Ask other U.S. cities that have been down this road. Memphis, Tennessee, is an infamous example: It built a pyramid-shaped stadium on its riverfront to attract big-name concerts and sporting events. Although the Memphis Grizzlies played there for several years, they found the arena didn’t meet their needs, and the pyramid sat empty for years. It’s now a Bass Pro Shop.

Richmond Mayor Levar Stoney asserts that Navy Hill will generate $1.2 billion in excess revenue over 30 years, while not risking a cent of taxpayer money. The reality is more complicated, and city residents should insist on answers to the following questions:

Why a publicly financed Coliseum, despite the evidence? In a 2008 survey of academic economists, Dennis Coates and Brad R. Humphreys found "near unanimity in the conclusion that stadiums, arenas and sports franchises have no consistent, positive impact on jobs, income and tax revenues." Research by the Brookings Institution also failed to produce a single example of a recent stadium project that had paid for itself in net tax revenue.

Is the use of tax-increment financing the only way to redevelop Navy Hill? Proposed tax-increment financing (TIF) will siphon increased real estate tax revenue not just from Navy Hill, but from an additional 70 blocks, into a special pot. The proper rationale for this arrangement is the “but for” test: But for this kind of financing, redevelopment and associated property-value increases would not occur, and therefore, the public is not incurring a loss. If that assumption is false, then Richmond’s general fund is being deprived of revenue that it would have received anyway.

How probable are the economic benefits? A pitfall of retail, dining and entertainment districts is that much of the activity they attract is not new spending, but rather local dollars that would otherwise have been spent in another part of the city. Economic impact analyses are easily inflated by failing to fully anticipate this displacement effect. 

What is the cost of missed opportunity? Mayor Stoney says, “There’s a cost to doing nothing,” but there is also a cost to locking up so many of the city’s resources in one project. It’s not that large projects guarantee failure. But even if the Navy Hill redevelopment is wildly successful, what good could be accomplished if the time, energy and resources spent on that project in the coming years were instead put into a less risky, more diversified set of public investments? The touted benefits of this project to the community over three decades are substantial — $600 million for schools, $180 million for affordable housing, $300 million in contracts for minority-owned businesses. But the alternative to this project is not $0, $0 and $0 for those priorities. Far from it.

The Incremental Alternative

A city like Richmond can do a lot to support and accelerate more organic forms of growth. At Strong Towns, a national advocacy organization that supports a model of development that allows cities to become financially strong and resilient, we call this model “Neighborhoods First.” There are hundreds of small investments in quality of life, vitality and public safety that the city could make right now, and we’ve found that it’s often these projects that deliver the highest return on investment for a local government’s scarce resources. A humble crosswalk, some street trees and a facade grant can bring up property values and begin virtuous cycles of private reinvestment. Technical assistance and workforce development efforts can give homegrown entrepreneurs a boost.

These investments are modest individually, but transformative in aggregate, because they respond to immediate needs.

This doesn’t mean eschewing the vision of a revitalized Navy Hill. But before city leaders commit decades of future revenue, Richmonders owe it to themselves to thoroughly evaluate the proposal. Are elements of it—such as a new hotel and affordable housing—viable if unbundled from the whole? Is a less expansive use of tax-increment financing an option, one that more clearly passes the “but for” test? How can the city reduce the risk it faces should plans go awry? Whatever choice Richmond makes should be made with the goal of growing the kind of place that’s so desirable to live, work and invest in that private developers and entrepreneurs will need no inducement to show up.

Cover illustration by Iain Duffus (via Richmond Magazine) 

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