After cleanup from Baltimore riots, some fear economic scars will linger

Baltimore, Md--4/28/15--Left to right, Ishawn Nelson, 12, his sister, Marae Nelson, 9, E. Baltimore, and LaQuicha Harper, Sandtown,  sweep the area outside the CVS on North and Pennsylvania Avenues. The store was looted and set on fire on Monday night during a riot.  Kim Hairston/The Baltimore Sun--#1988

After Monday's rioting, Attman's Delicatessen lost a catering event, about $1,000 in convention-related sales and half its usual Tuesday sales, said Marc Attman, owner of the Lombard Street landmark.

But Attman, whose family's 100-year-old shop survived a fire set in the 1968 riots, is worried about something more insidious than those immediate losses. He saw it after the earlier riots when nearby stores failed to rebound — a sense that danger lingers, discouraging investment and discomforting visitors.


"It's a business killer," said Attman, 63. "I'm sympathetic to people who want to voice their opinion. I'm not sympathetic at all to people who think damage is the right way to go about it."

The four days of rioting in 1968 after the assassination of the Rev. Martin Luther King Jr. was much more severe than anything witnessed since the death April 19 of Freddie Gray, 25, of West Baltimore from a spinal cord injury suffered in police custody.


The 1968 riots ended with six dead, more than 700 injured, 1,000 businesses looted or burned, some 5,800 people arrested and $13.5 million in property damage. The toll from Monday's chaos includes about 200 businesses closed, more than 200 people arrested and more than 150 fires, but peaceful protests resumed Tuesday and some businesses have reopened.

Some hope the recent unrest will go down in history as a spasm, a brief check on the city's apparent economic momentum, as population and development increased in parts of the city after decades of decline. But others fear the 24-7 broadcast of burning buildings and National Guard troops in the streets of Baltimore has set back years of slow progress made by a city still marked by vacant homes and food deserts where it remains difficult to secure a grocery store.

The stark differences between the two events make it hard to predict the long-term effects, said Bill Collins, an economics professor at Vanderbilt University, who has studied the economic impact of riots in the 1960s.

"Things depend on how strong an impression it makes and then how long the impression lingers on the perception of residents, both current and potential future residents, as well as businesses and where they want to locate and not locate," Collins said.

That's what worries Kirby Fowler, president of the Downtown Partnership, which is working to bring more residents and businesses to the city.

"Downtown and the city were on a roll in attracting residents, and the attraction effort depends on both the facts on the ground as well as the perception," Fowler said. "It's going to take a lot of effort to change people's minds and encourage people from the rest of the world and the rest of the nation to move to Baltimore and to visit."

Sherelle Black, 37, a county resident who grew up in Northwest Baltimore, opened the restaurant Great Granns on North Avenue in February last year, jumping at the chance to launch a business on a busy corner in a neighborhood hungry for investment.

She was in the store Monday when fires and looting broke out nearby, heart pounding with a mix of fear and adrenaline as a crowd of young people smashed into the pharmacy across the street, then thankfully passed her by.


Black reopened the next day. But she fears that in the aftermath, others like her will think twice.

"I don't know if people will still want to invest," said Black, pointing to areas hurt in the 1968 riots that have not been redeveloped. "I'm just concerned because there were a lot of things in place, a lot of initiatives, that maybe people won't want to do anymore."

CVS has said it is undecided whether it will reopen its North Avenue drugstore that was looted and burned on national television.

Those concerns are borne out in academic research into the economic impacts of the 1960s riots across the country, which show significant declines in property values in cities that experienced serious violence, even after controlling for other long-term trends, such as migration to the suburbs and loss of manufacturing jobs. For African-Americans, the loss in the value of their homes was particularly pronounced.

In cities with serious riots, the researchers also found relatively higher income declines for black families, as well as evidence of relatively higher unemployment rates — especially for men under 30. In some cases, those impacts lasted decades.

"Riots can, and in the 1960s did ... have pretty long-lasting and negative implications," Collins said.


Local economists said it is clear that in the short term, the abridged workdays, curfew and cancellations of conventions, festivals and other activities will take a toll on the city's economy — especially the tourism industry.

And while they agree that the 1968 unrest occurred on a far more damaging scale, they were divided about how deep a scar will be left by the latest violence.

Anirban Basu, chairman and CEO of the Sage Policy Group, said the disturbances reinforced the perception that Baltimore is unsafe, just as the recession had appeared to be loosening its grip on the local economy.

"Our economy is just now starting to kick into gear ... and now we have this significant shock to the supply side of the economy and it hurts," said Basu, who has acted as an adviser to many politicians, including Gov. Larry Hogan. "What it means is that there's going to be a lot of investment that would have taken place in the next couple of years that probably won't."

While the protests could result in increased government and nonprofit investment, he said, the private sector is likely to take a "wait-and-see" attitude. He predicted slowed private investment over the next five years.

"I believe the economic impacts will linger for many years to come," Basu said. "This has been really bad for business."


But Daraius Irani, chief economist at Towson University's Regional Economic Studies Institute, said he thinks people's memories are short and that the peaceful protests will help steer attention to the city's disparities.

"We had such a small amount of this hooligan behavior ... that hopefully that part of the thing gets forgotten," he said. "The protesters are raising some of those issues, and their voices shouldn't be overshadowed by those people who decide to act the fool."

Some local businesses echo that optimism.

After the 1968 riots, Samuelson's Diamonds relocated from Pennsylvania Avenue to a West Baltimore Street block near the Hippodrome Theatre.

"I don't think what's happening now is much of a comparison to what happened back then," said Ron Samuelson, 42, the third-generation owner of the jeweler, which has been in business since 1922. "It's troubling to hear about ... but we're certainly positive about Baltimore. ... I'm not worried."

The CEO of Corporate Office Properties Trust fended off questions about Baltimore's safety last week during a quarterly earnings conference call with analysts, who asked him to explain the firm's decision to enter the Baltimore market. COPT acquired the 250 W. Pratt Street tower for $63.5 million in March and also wants to develop waterfront property it owns in Canton.


"We feel very strongly that this is a blip," COPT CEO Roger Waesche Jr. assured financial analysts, according to a transcript provided by Seeking Alpha. "What happened last night is part of an ongoing national dynamic whose latest local flash point is Baltimore. ... Last night's events won't detract from these underlying trends that are propelling the city and region forward."

In a subsequent interview, Waesche said he hopes the protests will push public and private leaders to improve education and focus on areas that have not participated in the economic gains, making the city healthier in the long term.

"Sometimes in business or in personal life, you need to go backward to go forward, and I think that that's what we'll have to do, go a little bit backward and solve some underlying issues to go forward," he said.

Last week's clashes were fueled in part by frustration and lack of faith that the progress seen elsewhere in the city will spill over into distressed black neighborhoods, said Heru-Ka Anu, 58, who grew up in Cherry Hill and whose company, African American Media LLC publishes a directory of Baltimore's black businesses.

"The racial disparity, it's obvious. The economic disparity, it's obvious. And it's persistent," said Anu, describing the outrage he felt on a rare visit to Boston Street when he saw the flourishing of a "separate Baltimore, white Baltimore."

"That area used to be economically depressed at one point. It looks nothing like that now," he said. "What we keep hearing is 'progress is on the way.' Really?"


At Freddie Gray's funeral, the Rev. Jesse L. Jackson, the civil rights leader and 1988 Democratic presidential candidate, was met with thunderous applause when he declared: "The west side needs the same thing the harbor needs: credit, trust, investment, TIF money" — an apparent reference to the controversial $100 million-plus in public financing approved for Harbor Point.

Attman, whose store was untouched during last week's mayhem, said the city's assistance for big developments has helped fuel some revival. But without other efforts, he said, frustration builds.

"They forgot about the middle-income person. They forgot about the lower-income person," he said. "All they cared about is putting money into the big guys."

Darlene Smith, professor of marketing and former dean at the University of Baltimore's Merrick School of Business, said the violence that broke out is a "PR and marketing nightmare for the city" that likely resets the city's timeline for achieving goals, such as growing the city by 10,000 families over a decade.

But it also refocuses efforts to address disparities, she said.

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"The city isn't going to thrive if only part of the community succeeds," she said. "As a community of business and civic leaders ... we need to come together and have some serious conversations about how we're going to address those issues."


While the violence might force the city and other leaders to direct more investment and attention to areas that need it, Anu said he's not convinced about a better outcome.

"If [the activism] can be sustained, it can force the hand of the city to do something, force the state to do something," he said. But "there is pessimism because the things that they will offer, if anything, are going to be cosmetic, nothing to deal with core issues."

Nancy Ware, broker-owner of Certified Home Specialists Realty Inc. for more than 20 years, said it would be difficult for the unrest to depress property values further than the housing crash did.

But she hopes the pressure will make political and bureaucratic reform a bigger priority.

"I don't think anything is going to change significantly in terms of real estate," she said. "But what does need to change is, the police need to stop killing the kids."