When the Company Leaves the Company Town

The ruins of Studebaker building 85 in South Bend, Indiana. (Image via Flickr.)

South Bend, Indiana, is known for a few things: Notre Dame University, Mayor Pete, and great population loss due to deindustrialization. Like many midwestern cities, South Bend grew from a thriving manufacturing industry; the Studebaker automobile factory brought many jobs to the town and heavily influenced how the city developed over time. Unfortunately, the automobile factory closed its doors in 1963, leaving South Bend without its most important industry and resulting in rapid population loss and, eventually, stagnation. 

This is a story so many rust belt cities are familiar with. South Bend has spent many years trying to figure out how to heal their town, but they face some challenges that other cities may not have to solve. Because South Bend was a company town for Studebaker, the growth of the city was heavily influenced by automobiles. Having an auto-centric economy resulted in the built environment being dominated by suburban, auto-oriented development. 

This style of development has had painful and enduring effects on the city’s coffers. Today, South Bend is dealing with a failing stormwater and sewer system that it cannot afford to fix, due to its population loss. With population decline comes a decline in property ownership, resulting in South Bend taking a hit to its most important source of revenue (i.e., property taxes), and has since diversified its funding sources out of necessity. 

This equation leaves South Bend not having enough to pay to maintain its existing infrastructure. The geoanalytics firm Urban3 looked into the city’s income and expenses and created a net cost model that maps what parcels are net positive revenue for the city and which are net negatives. 

South Bend’s net cost model, shown above, depicts net positive parcels in black, rising up, and net negative parcels in red, sinking down. This map is a view from the ground looking at South Bend’s revenue net losses and gains in 3D. Closer to the city’s center, there are many spikes of positive revenue, but when considering how many net negative parcels are spread throughout the city, one begins to wonder if the net positive is enough to cover the net negative parcels.

Thanks to Urban3’s analysis, South Bend was able to understand the scope of the issue and was given the tools necessary to start to fix it. The city began to realize major changes needed to be made, in order to have the funds to cover things like fixes to the failing stormwater and sewer systems. South Bend grew up as a suburban city, with miles of road networks connecting single-use zones to each other. This expensive style of building has resulted in tremendous maintenance costs that a city with a declining population struggles to afford. 

A common issue with infrastructure spending is deferred maintenance, putting off the problem until it becomes unavoidable. This is a challenge in many cities, not just South Bend. Cities often start a pattern of expanding and annexing without making critical considerations into how they will maintain their roads, bridges, and pipes over time. This leaves places without the financial resources to maintain the foundations they were built upon, creating compounding issues for the city to solve.

In South Bend, this issue of deferred maintenance is present, along with growing vacancy and a declining population. After the Studebaker factory closed its doors in 1963, many people left the city for other places with manufacturing jobs. After the immediate exodus, there continued to be a steadily declining population and when people leave, so do their tax dollars, resulting in a city without enough money to pay for its expansive infrastructure networks. 

Today, South Bend is dealing with a big vacancy problem, as well. The city is aware that they need to thicken up their existing neighborhoods to survive. Along with the net cost model above, Urban3 mapped South Bend’s vacant parcels, giving scope to the vacancy issue. After seeing this map, there was no denying the city needed to act now to make sure South Bend survives. 

Thanks to Urban3’s analysis, the city is now able to create targeted solutions to its most glaring problems. South Bend has started to develop a revolving loan fund program to jumpstart the development of city-owned vacant parcels in the midst of the COVID-19 pandemic. The fund began taking preliminary screenings in January 2021 with an initial balance of $7.7 million.  This investment will go a long way to helping rebuild South Bend. 

The loan fund is meant to help attract small businesses and start-ups with gap financing to keep their business running in South Bend. Gap financing is a tool that helps businesses that are having trouble procuring funds from conventional lending sources.  The funds can be used for things like general business needs, real estate, or research and development. 

This tool is being used as an attempt to spark incremental infill development in the city. The fund outlines a mission to retain existing businesses while attracting new ones; this type of investment in the city is a way to build an enduring and dynamic economy. It is a smart adjustment after learning the hard lesson of what could happen to a place when it relies on a sole business to support and attract economic activity. 

Along with the revolving loan fund, Urban3’s analysis inspired the city to implement a moratorium on sewer and water infrastructure expansion into the edges of the city limits. The city staff used Urban3’s work to prove to the city council that expansion is not a good return on investment for South Bend

Today, South Bend is a town facing problems that many of our cities will have to face in the future. It grew up on a single industry, and that industry had ripple effects on how the city was built over time. For the first time since the 1950s, South Bend is seeing a faster population growth rate than St. Joseph County, but the city still cannot push the problem down the line for a few years. South Bend is being confronted with crumbling infrastructure; with creative solutions like the revolving loan fund, hopefully the city will be able to thicken up and prosper for years to come. 

If you are interested in hearing more about the current status of South Bend and get an inside look at their innovations to make their town strong, check out Urban3’s webinar “Decoding: The Economics of Infill“ on August 26, 2021, at 1 p.m. EST. You can register to attend (for free!) here.

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