Baltimore's New Deal: WPA-level spending has the power to remake the city, but much of it might be going away
By By Edward Ericson Jr.
Nov 25, 2014 | 3:14 PM
Baltimore City's first manufacturing forum took place on Oct. 7 in the Hilton, a deluxe hotel the city spent $300 million to build, which has lost about $50 million since its 2008 opening.
Caron Brace, the Mayor's press secretary, and Joanne Logan, who does the same job for the Baltimore Development Corporation, were seated at a table outside the main hall where a keynote panel was about to discuss Baltimore's burgeoning constellation of small high-tech incubators and "maker spaces."
In celebration of the city's potential as a center of manufacturing, Mayor Stephanie Rawlings-Blake gave a speech, saying we "have everything we need in Baltimore to have strong manufacturing," which after decades of devastating decline "is poised for a resurgence."
The desperate need for jobs—and for training for these jobs—in these factories that for the most part do not yet exist here was the event's subtext. That, and the underlying notion that Baltimore City has the infrastructure—the roads, the rails, the port, the electric grid, the schools, and the water and sewer works—that growing industrial companies need.
Left out of the discussion was the extraordinary public investment now rebuilding and improving that infrastructure. Between the $4.4 billion being spent right now by Public Works, the maybe $2.4 billion to be invested rebuilding the city's schools, the $1.5 billion State Center, and the $2.4 billion-plus Red Line light-rail project, Baltimore has a historic public construction boom under way. Depending on how one counts it, the total may exceed $10 billion. Spending on that scale in the Baltimore region is comparable to what was spent nationally by the Work Projects Administration (WPA)—the legendary federal jobs program of the Great Depression—between 1935 and 1942.
This huge wave of public money, much of it borrowed at low rates of interest, is arguably acting as the largest single job creator in the region today—or at any rate could well do so in the next few years as construction ramps up in full.
Walking up to the table, retrieving my obligatory name tag, I asked Brace and Logan whether the unprecedented amount of money being spent on city infrastructure isn't all part of an ambitious plan to bootstrap the city's economy with public investment.
Both women's eyes widened just perceptibly. Logan said she wasn't sure what I was talking about.
Perhaps thinking it my aim to criticize the spending of taxpayer funds, Brace interjected that the city's projected investment in the Red Line is a mere $230 million, with the state and federal governments (more or less) covering the balance. Neither woman endorsed—or even seemed to understand—my theory.
I thought: Either this ingenious master plan is even more secret than I heretofore realized—or it is no plan at all.
A month later the answer is clear: There is no plan. It really is happenstance that Baltimore City is currently investing at least $7 billion in various public projects—an amount equal to more than twice the city's annual budget and nearly five percent of the yearly output of the regional economy as a whole.
The jobs to be created or maintained by this extraordinary effort hold no special place in the city's or region's constellation of planning, economic development, and public employment bureaucracies.
"Each one of these projects that you used as examples, they're [overseen by] different agencies," Brace says in a follow-up interview last week, adding that the mayor does talk about the projects regularly "in front of the appropriate audiences."
Rawlings-Blake must walk a fine line between cheerleading and caution, Brace says, lest the planned projects and the money funding them does not appear: "We have to be mindful of how we package things, because things do change."
And so they do. With the Nov. 4 election of Larry Hogan as governor, the chance that the huge public building spree will continue at its previously-planned scale has noticeably dimmed.
The $1.5 billion State Center project planned for downtown cleared its last legal hurdle eight months ago, but has not publicly moved forward toward ground-breaking. No word on whether Governor-Elect Larry Hogan, who has been critical of government spending, will put it on hold. (MITHUN/Stephanie Bower / November 25, 2014)
In an alternate universe, Mayor Stephanie Rawlings-Blake would right now be bragging about her administration's enormous training apprentice programs designed to bring thousands of the city's jobless African-American men into the workforce. The Baltimore Development Corporation could be touting the enormous improvements in the city's schools and waterworks to far-thinking companies in drought-parched states.
But this is not happening.
There are two reasons there has been so little discussion of the big build's economic implications. Both are unflattering, although one puts Baltimore in line with any other American place in the Age of Obama.
"Today, with infrastructure in such terrible shape and interest rates so low, you can see why cities and states would want to do big public works projects," says Michael Grunwald, Time magazine reporter and author of "The New New Deal," a book that makes the case that President Obama's $800 billion stimulus program in 2009 was an unrecognized success. "But in this political climate, you can also see why they might not want to draw too much attention to it."
Public spending, which sensible economists understand is the only engine of growth when a nation's economy falls through the floor, has been so disparaged by right-wing ideologues for so long that even those who understand the benefits make little effort to tout them
The other reason is uniquely Baltimore. In a city infamous for its "highway to nowhere" (dismantled beginning in 2010 to make way for the Red Line light rail expansion), unlinked rail transit systems, and other planning failures, it is apparent that most city leaders just haven't noticed the historic public spending spree. The projects are not connected thematically or—for dubious political reasons—fiscally. And each is managed by its own agency or bureaucracy, so that there is little incentive for an enterprising politician or planner to develop a broad analysis of their collective implications—either in terms of the regional economy or quality of life.
"Basically there is an opportunity missed here for city officials," says Ron Kreitner, a former state planning director who shepherded the Westside Renaissance development. "You struggle to find any operative unifying vision that encompasses all this."
That Baltimore's leaders have failed to make public building projects a rallying point has implications for the immediate future, as it may cost residents thousands of jobs. But before we think about that, let's spell out the figures in a little detail and add some context.
Currently there are four multi-billion dollar projects either underway or imminent. One of them—the $2.5 billion, 14.5-mile east-west Red Line rail project, which would for the first time link the city's subway and light-rail lines, creating the rudiments of an integrated public mass-transit system—is certainly imperiled. The rest are either a lock or, at last check, close to it. They are:
+$4.4 billion to rebuild and upgrade Baltimore’s sewer and waterworks
+$1.5 billion to build a new State Center
+$1 billion to rebuild at least 23 Baltimore City schools
These projects total about $7 billion. With the Red Line there would be nearly $10 billion in big-ticket construction. If the school system got the additional $1.4 billion consultants say it requires (the original plan encompassed more than 130 buildings, reduced to 35 in the $1 billion "phase 1" and lately trimmed again as budget realities set in), there'd be more than $11 billion on the boards.
And that does not include the already-under-way I-95/895 highway work that's been snarling traffic in White Marsh for four or five years running. Or the $100 million renovation of the Enoch Pratt Free Library coming soon. Or the Baltimore-Potomac tunnel, whose rebuild has not yet been estimated ($1 billion would be a very low guess) but for which the planning study alone is budgeted at $60 million. It does not include the $290 million "Canton Viaduct" which will replace the elevated section of I-895 north of the tunnels starting in 2016.
Add them in and you're looking at a possible public infrastructure spend in Baltimore of more than $12 billion over the next decade or so, before accounting for the inevitable cost overruns.
That is nearly a tenth of the entire region's economic output in 2011. And it would come pretty close to the $13.5 billion spent by the WPA. During that time the nation's Gross Domestic Product totaled $817.3 billion, so the WPA spent an average of 1.6 percent of GDP per year. If Baltimore spends $7 billion over the next six years on a $160 billion average regional gross product, that's 0.73 percent per year, or nearly half a WPA.
The money being pumped into the local economy should increase the growth rate by 20 percent over the 2.5 percent that might be expected, I estimate.
Dennis Coates at the University of Maryland, Baltimore County, said the public projects would likely increase the local economic growth rate by more like 15 percent.
"It is certainly a construction jobs program, and I would contend it will affect growth positively, though precisely how much, especially in the short term, is questionable," he says. "Avoiding broken water mains and the problems those cause is enormously beneficial, even if there is negligible impact on growth. The mayor's office is not publicizing this, so in that sense it is invisible, but when water-main work is under way, that will be very visible."
"The overall investment [in construction] is probably a little bit above what was to be expected," Daraius Irani of the Regional Economic Studies Institute at Towson University says. "It will provide some long-term jobs but in many cases they will be pulled from other jobs. In the grand scheme of things it's not a huge amount. But in terms of the change, 20 percent is pretty reasonable and pretty significant."
"I think you got it," says Anirban Basu of Sage Policy Group, WYPR, and now Governor-elect Hogan's transition team, in an email. "I suspect no one is taking credit because: 1. No one has put it together the way you have: 2. This reminds people of all the taxes they pay; and 3. Debt service is getting scary."
There is the rub. Directly or indirectly, much of the construction is dependent on state bonds, which need to be repaid by state taxpayers.
"Too many state bonds were issued in recent years. The proverbial chickens are coming home to roost," political consultant Barry Rascovar wrote in the Nov. 16 issue of The Maryland Reporter. He estimates that by 2020 the state's debt service—the mortgage payment, if you will—will top $550 million. Last year the state dipped into general funds to pay debt service while paying some operating expenses with state bonds, Rascovar writes: "This diversion has taken nearly $2.5 billion out of the state's construction program and has increased debt service markedly."
This debt crisis is not exactly news. A year ago an editorial in The Sun cautioned: "There is too much uncertainty about Maryland's finances to endorse even a small increase in the borrowing limit next year."
So it's a fair bet that the incoming governor will curb future spending, especially big-ticket items like the Red Line. And maybe the State Center as well which, although it cleared its last legal hurdle eight months ago, has not publicly moved forward toward ground-breaking. State Center officials did not respond to an email sent through the project's website.
The proposed Howard Street/University Center stop of the Red Line, the $2.5 billion, 14.5-mile east-west rail project which would for the first time link the city's subway and light-rail lines, creating the rudiments of an integrated public mass-transit system.(Public domain image from the State of Maryland / November 25, 2014)
Their silence is typical.
Despite Hogan telling a reporter on election day that he would push back the Red Line's building schedule from next year to, well, indefinite ("At some point we should build it but we've got to get our economy turned around first," ABC News reported him saying), Hogan's team is saying nothing about his plans, according to an apologetic Erin Montgomery, his press secretary. And few others who one might expect to talk about big regional issues like a $7-$10 billion public infrastructure investment have much to say, either.
Larry Klimovitz, executive director of the Baltimore Metropolitan Council (according to the website they "Identify regional interests" and "Collaborate on strategies, plans and programs"), begs off. "We are primarily about transportation planning," he says, "not construction industry or infrastructure or any of that."
Given Hogan's avowed distaste for the Red Line I ask Klimovitz for the over-under on the project and he punts again, diplomatically. "We're like everybody else . . . everybody is sitting back not holding their breath but taking a breath because we need to wait on the transitions," he says. "We're waiting on Congress to set a budget. It all starts at the top, and speculation will only get people excited when there's nothing to get excited about."
The BDC's Logan did not respond to follow-up emails asking for the agency's thoughts about the ongoing and potential WPA in our midst.
Brace, Mayor Rawlings-Blake's spokeswoman, did not connect me with any big (or even small) thinkers on the subject, while The Greater Baltimore Committee's Donald Fry—usually a quote machine on all things planning, economic, and development-related—also did not get back with me after several calls and emails.
Pam Ruff, executive director of the Maryland Economic Development Association, responds to an email asking about the implications of the big spend by noting that hers is a "'trade' association for economic development professionals" and suggesting I contact the Maryland Department of Business & Economic Development (DBED) or The Baltimore Development Corporation (BDC). Her organization "encourages partnerships and networking among people committed to bringing jobs and capital to Maryland, and promotes economic development as an investment in Maryland."
Also not responding: Tom Sedowski of the Economic Association of Greater Baltimore.
That organization does not appear to be focused on infrastructure investment. A selection of its recent reports includes several on cyber security and "biohealth," reports on innovation and education technology and "an overview of trends in venture capital investment." The overall feel is of regional marketing aimed at business owners who are maybe wanting to relocate, with special emphasis on tech and shipping types.
That said, the alliance's statistics on construction employment are actually a huge bright spot. In a 2013 report and slide show titled "Job Creation Needs, Trends and Opportunities," the alliance shows 2012-13 growth in "Mining, Logging and Construction" in the Baltimore Metro was +10.6 percent. The overall U.S. rate was less than 3 percent. So Baltimore's construction job growth was triple the national average.
This is not news to the construction industry, which has complained for years of a shortage of workers.
"Overall what we are seeing is that even in areas with modest amounts of construction growth, firms are finding there are relatively few unemployed construction workers sitting at home waiting for the phone to ring," says Brian Turmail, spokesman for Associated General Contractors of America. Many former hard hats have moved to the trucking industry or the oil patch, he says, and they've become hard to replace because "there are relatively few secondary and post-graduate training programs preparing new construction workers."
That means wages are starting to rise but construction firms are also using more subcontractors and temporary labor, Turmail says.
Because none of the regional-planning or economic-development organizations has done a study, just how many Baltimore jobs $7 billion in public construction could create is not clear.
It looks like the Baltimore City Department of Public Works is the only entity taking credit for its spend. It claims the "economic impact" for the ongoing water works program is $12.6 billion over the next decade, supporting 7,460 jobs.
Impressive. But the "impact" figure is a multiple of the $4.4 billion capital spend. The department has another analysis looking only that, and it estimates 26,900 job years—basically 2,700 jobs per year for 10 years.
That works out to $1.6 million per job; $160,000 per job per year.
If the other projects create jobs at roughly the same rate as the waterworks, the impact on the region's unemployment figures will be pretty small—on the order of double to triple the waterworks jobs, or an imputed maximum of about 8,300 full-time jobs during the decade in question. Obviously if the department's multiplier is right you could double or triple that job figure and get over 20,000 jobs.
But even with straight math with no multiplier, that's 8,300 new hard-hat-type jobs needed on top of the already-stretched local construction market.
This would appear to open the door wide for new workers—just what Baltimore City would seem to offer.
"I think it's going to be one of the things to alleviate the high concentration of poverty in neighborhoods in my district like Claremont and Berea," says Cory McCray, a union electrician just elected to the House of Delegates from the 45th District. With one out of four Baltimore families getting by on less than $25,000 a year, he says it's incumbent on people like him to create the pathways on which people with a high school education can get good-paying jobs, and public construction could be a huge part of it. "I've had a ton of meetings since Nov. 5 on this subject," McCray says. "This is exactly the opportunity our city needs, it's a lot of money and we have to have the tools to capture it."
But it is unclear that the city has those tools at hand.
"We have 350 guys placed," says Jason Perkins-Cohen, who runs a pre-apprentice program called Jumpstart that pays men to train into the construction trades. The program is nine years old. "It's not perfect. We do have some sad stories for whom it didn't work for them. But we have some amazing stories of guys who . . . did."
One of those is Antoine Boykins, who now works for the scaffolding company that just pulled its framing off the Washington Monument on Charles Street. "I personally went through the program after I came home from incarceration," the former Marine says. "I was working at McDonalds and had become a manager . . . but I was looking for something to boost my career."
Now a part-time instructor at Jumpstart, Boykins says he now earns more than $70,000 a year managing shipping and receiving in the scaffold yard, and has been hiring students from the program to work under him there.
Baltimore City's official unemployment rate is just under 9 percent. Its workforce-participation rate is very low, though, and it's likely that about 30 percent of the city's working-age African-American men—about 30,000 of them—are without work.
From that pool, Project Jumpstart has, in nine years, placed 350.
Jumpstart is not the only jobs training program, but it is significant, and it has expanded lately, he says. One challenge is funding. The students are paid $12.50 an hour to study, and there are other expenses—not only class instruction but other services. A big part of the program is getting students' drivers licenses cleared and sometimes getting them vehicles so they can get to work.
"Most of them will not hire if that individual does not have a drivers license," Perkins-Cohen says. "Because even if the project is a school they can get to with transit, the next one after that probably will not be, and the contractor is going to want to take this worker down the road."
The city-schools project is a perfect case to illustrate the difficulty of connecting public spending to jobs. "There was no money set aside for training," Perkins-Cohen says.
Beyond that, the actual jobs are going to be short-term. "Maybe three months per school," Perkins-Cohen says. "We have to look at this public spending as a launching pad for a career . . . not just having a construction job for four months."
The school-building project does not have a specific pipeline for new construction workers built in, and in the hiring plan "the focus was getting employers to include language regarding a workforce development plan," Perkins-Cohen says.
Minutes of the June 4 meeting of the "Workforce Opportunities Group" of the "School Construction Collaborative" illustrate the plodding nature of change: "It was noted that the draft local hiring plan was not a community-based document. The community will want information on the types of jobs, the process for applying for those jobs and how we will communicate this information," the minutes say. "It was noted that a communication plan is needed; a website is needed." The group's next meeting is Dec. 3.
The state Department of Labor, Licensing and Regulation has a division devoted to apprenticeships in the construction trades. In its last meeting, in July, the board discussed President Obama's desire to double apprenticeships. The focus was on details—wage and benefit levels and wage-progression schedules—and not on the enormous amount of taxpayer-underwritten work looming.
Baltimore City already has a website for job seekers. Developed through MOED, the Mayor's Office of Employment Development, and linking to organizations such as the union-run C.H.O.I.C.E.—Community Hub for Opportunities in Construction Employment—it functions, along with three offices scattered around the city, as a "one-stop" center for job seekers.
"We're excited about it and we're preparing the local workforce," says Brice Freeman, MOED's spokesman. "That's what our office does."
The web site features a mobile app called Apploi, which allows one to search by job type or employer. Last Tuesday, entering the names of big local construction contractors—Spiniello, Whiting-Turner, etc.—brought one hit.
Kreitner, who started his career as an aid to Mayor William Donald Schaefer, says this arrangement of sleepy, siloed bureaucracies represent a missed opportunity, both politically and from a planning perspective.
"Projects have to be much more integrated with things that concern people," he says, "to give them the confidence that things will get better."
In the election just passed, two-thirds of Baltimore City's voters did not bother to cast a ballot. Lt. Gov. Anthony Brown, the Democrat, lost his bid for governor by about 65,000 votes, state-wide. If Baltimore City voters had been inspired enough that half went to the polls—the percentage that Baltimore County turned out—and if those voters went for Brown in the same percentage that those who did vote here did, then nearly half of Brown's deficit would have been erased.
"There needs to be something that inspires people about having a different future," Krietner says. "That's where I think there's a drop-off here."
Kreitner says that back in the day there was much more direct effort to engage community leaders on projects that weren't even in their doorstep."For the bond issues there used to be a city-wide, almost rallies, on the bond issues," he says. "This was for the Everyman Theaters of the world and for school construction."
The bond issues always pass, and engaged citizens—like construction workers, for instance—tend to vote for them.
"I actually voted for some of that money they ended up getting," says Boykins. "I particularly paid attention to that."
The laborer's union, LIUNA, did too. It lent Brown $500,000 for his campaign's waning weeks. As The Sun reported, "Bevin Albertani, political director of the Laborers Union, said the group had known Brown a long time and shared his commitment to investing in infrastructure." The loan was not paid back, and Brown had to sign a personal guarantee for it. The union did not return a call and email seeking comment for this story.
The East Side One-Stop Career Center on Madison Street has career counseling and résumé copying, as well as some job listings.(Edward Ericson Jr. / November 18, 2014)
Baltimore's East Side One-Stop Career Center, on Madison Street between the Elevate Chapel AME church and the parole and probation office, is quiet at 2 p.m. on a recent Tuesday. There's a dreadlocked guy in the vestibule talking on a smartphone with a bright pink cover while a tall, angular man with graying hair waits on one of the stackable chairs just inside the door, going over his résumé and another job application.
"I don't do construction work," the man, Jonathan Booth, says. "I do food service. I used to work in hospitals."
Booth is trying for a dishwashing job, but he knows his chances are slim. A felony from 2005 keeps him down, he says, even though the question on the application asks only about convictions within the last seven years. "They check back more than seven years," he says.
And so Booth, who says he attended Morgan State University and "worked all my life," is among the roughly 30 percent of working-age African-American men in Baltimore without a job.
A white guy named Barry, wearing a white sweater, walks up and hands Booth a stack of résumés he just copied for him. Barry gently assures Booth that his résumé will get to this prospective employer.