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As city's economy changes, job losses continue CAMPAIGN 1995

THE BALTIMORE SUN

In Baltimore, the recession never ended. As mayoral candidates discuss jobs and growth, a disturbing fact looms: The city's economy has quietly, fundamentally changed.

Commerce in Baltimore once beat in rhythm with business activity across Maryland and across the nation. No longer.

"There has been a structural shift," said Michael A. Conte, director of the University of Baltimore's Regional Economic Studies Program.

"What the city is going through is not a cyclical phenomenon any more. We have moved into a new era. Unfortunately, it's not a happy one."

Mr. Conte and his team knew something was seriously wrong in Baltimore when their statistical formulas stopped working there. A tried-and-true index has predicted that the city would enjoy growth and relative prosperity each year after 1991. Instead, Baltimore surprised university economists by continuing to lose employment through 1994.

The total toll over five years: 61,900 jobs.

Baltimore's suburbs continue to expand and thrive. But the last time so few people held jobs inside city limits was the mid-1970s. All the city's hard-won employment growth of the 1980s has been wiped out.

Job disappearances in 1994 were less severe than previously, and preliminary data suggest that city employment leveled off in the early months of 1995. Nevertheless, said economist Charles W. McMillion, "it is clear that the city continues to lose jobs."

Whose fault is it? As Baltimore prepares to vote for mayor, economic policy is a top issue and gains new urgency with Congress' plans to slash the federal payroll. More than 15,000 federal employees work in the city. Federal shrinkage could expose another pillar of employment to layoffs and shutdowns.

Kurt L. Schmoke, mayor since 1987, defends his economic record as a creative and positive response to hostile trends largely out of his hands. Mary Pat Clarke, City Council president and Mr. Schmoke's opponent, lays the city's 13 percent employment loss since 1989 directly at Mr. Schmoke's polished Bass loafers.

The facts are somewhere in between, interviews with economists, economic development leaders and business operators suggest.

It is true that Baltimore has suffered from forces remote and largely unstoppable: Corporate mergers. Cuts in defense spending. Fewer federal urban-development dollars. Foreign competition. Cheap gasoline, cellular phones and laptop computers -- centrifugal forces spinning jobs into the hinterlands.

Forces beyond control

"If we could just get $100-a-barrel oil, Baltimore's problems would be solved" by making suburban commuting too expensive, said Mr. McMillion, president of MBG Information Services, a Washington economics consultancy.

But many of Baltimore's economic handicaps are local. The city's high crime and problem schools have hurt its jobs picture as much as foreign competition or corporate layoffs, economists said.

At the same time, the Schmoke administration has drawn criticism for the way it has coped with economic megatrends. Many business people believe Mr. Schmoke hasn't devoted enough personal energy to wooing employers, is out of touch with big-company executives and seems largely uninterested in business.

Business people are unenthusiastic about the candidacy of Mrs. Clarke, a community activist whose best-remembered economic act was her resistance 17 years ago to legislation that led to Harborplace, the germ of downtown's revival.

But Mr. Schmoke, business people believe, has an uneven economic record. The comments go beyond complaints, reported by The Sun last year, about alleged incompetence at Baltimore Development Corp., the city's economic development agency.

Sonny Morstein is a jeweler on Light Street and president of the South Baltimore Business Association.

"I think there is much more this mayor can do to create a pro-business attitude to make business people feel he cares," said Mr. Morstein, who nevertheless praised Mr. Schmoke for recently boosting services to community shops.

More pro-business

A draft report from a committee of business leaders studying Baltimore Development Corp. makes a similar point. "The mayor should more aggressively identify himself as the city's principal cheerleader . . . and should leave no doubt that economic development is an ongoing mayoral priority," the report said.

The word "cheerleader" evokes images of former Mayor William Donald Schaefer, known for prodding, cajoling and threatening businesses and politicians onto his development bandwagon. It's a comparison that is poison to the Schmoke campaign, which holds that Mr. Schaefer, who stepped down as governor this year, gets too much credit for Baltimore's 1980s revival.

But in the minds of many local corporate leaders, Mr. Schaefer was the very model of a business-minded mayor.

Mr. Schaefer "when he was may or had a very intimate relationship with the business community," said William A. Wycoff, chairman of the Baltimore City Chamber of Commerce and an executive at Loyola Federal Savings Bank. "He knew most business leaders on a first-name basis. He certainly knew their phone numbers and how to get hold of them. The perception is that Mayor Schmoke doesn't have that intimate relationship with the business community."

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Many cities would love to have Baltimore's economy, warts included. As of last year, Baltimore still had more jobs -- 411,000 -- than any locality in the state. Jobs are a crucial measure of municipal health, affecting population and revenue from real estate, sales and income taxes.

Baltimore's economy is in better shape than those in cities such as Cleveland, Hartford and Detroit, economists said. And Baltimore's gain of 40,000 jobs between 1982 and 1989, analysts point out, was stimulated by an unusual gush of federal spending on both urban projects and defense. A certain letdown after the money dried up was to be expected.

"Clearly problems are there," said Douglas Becker, who recently agreed to relocate his company, Sylvan Learning Systems Inc., from Columbia to Baltimore. "But I think the pendulum has swung too far one way and that people don't see the city's advantages."

Baltimore is an international tourist destination. The city also recently beat more than 70 other localities to land a $100 million federal empowerment zone grant. Top AIDS researcher Dr. Robert C. Gallo has agreed to move his lab here. The Columbus Center marine biotechnology lab, a Disney-designed children's museum, a huge convention center expansion and other current projects will add to downtown's luster.

For many businesses, Baltimore's advantages -- a plentiful work force and proximity to other large East Coast cities -- still outweigh its demerits.

The city "is exactly where you would want a plant in a huge metropolitan area," said Joseph Ciampaglio, regional manufacturing manager for National Gypsum Co., which is expanding its Baltimore factory.

The Schmoke administration is widely respected by bond investors for fiscal prudence. "There aren't many cities that have debt management policies that are as well planned out and well executed as the city of Baltimore," said Diane Brosen, director of public finance for credit analyst Standard & Poor's.

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But Baltimore is fighting deep and destructive economic currents. Mrs. Clarke says Baltimore has lost 65,500 jobs since 1989. That's based on estimated monthly comparisons that tend to fluctuate. A better measure, federal economists said, is to compare average monthly employment in 1994 with the same figure five years ago, yielding 61,900 fewer jobs.

A huge loss

Either way, it's a huge loss. Some 3,500 of the eliminated positions came from Maryland National Bank and other local commercial banking operations that have been absorbed by out-of-town rivals and stripped of middle managers.

Restaurants and bars have shed 7,000 jobs since 1989, proving that Baltimore's tourism boom is mainly a downtown phenomenon. More than 10,000 other retail jobs have disappeared, as city residents increasingly shop in the suburbs. Almost 8,000 manufacturing jobs are gone in the past five years, as companies continue to shift jobs south and overseas.

Baltimore has only a little more than one-fourth of the 130,000 manufacturing jobs it had in the 1950s, a change illustrated by a drive through the city's Fairfield and Brooklyn industrial sections. Many company names of decades ago there -- Aerosol International Inc.; Serve-U-Sewing dressmakers; General Refractories Co. brickmakers; Eastern Box Co.; Diesel Equipment Corp. -- are gone.

Baltimore's "edge cities" of Owings Mills, Towson and Columbia continue to lure city businesses. Downtown offices, a fifth of them empty, command the second-lowest rents, after Los Angeles, among major downtown markets, according to Julian J. Studley Inc., a New York real estate firm.

Demand for older office space downtown is so weak that the owners of one building, 300 N. Charles St., have taken the extraordinary step of shutting off the utilities and mothballing four of five floors.

"The market is still too soft," said Frank Sherriff, president of the .. building's management firm.

Corporate attrition has thinned the ranks of top city executives to help lead development. Mr. Wycoff is a good example. Businesses are grateful to him for helping to restart the Baltimore city chamber. But his employer, Loyola, just submitted to the same kind of merger that has decimated other city financial employment. He and scores of other Loyola workers in the city may not have jobs next year.

The attrition has aggravated what some see as a leadership vacuum among city executives. "I think some would question whether the business community is doing enough" to spur development, said Laurie Schwartz, president of the Downtown Partnership of Baltimore.

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Still, some don't think elected city leaders are doing enough, either. Several of Baltimore's recent major successes owe little to Mr. Schmoke's efforts, economists and business people said. Oriole Park at Camden Yards was a Schaefer project. Sen. Barbara A. Mikulski gets much of the credit for Columbus Center. The Convention Center project was a Schaefer proposal to which Mr. Schmoke at first resisted committing city money.

Too conservative?

Indeed, some business leaders believe the city has been too fiscally conservative and should spend more on development. "If you talk to businesses, they'll say their No. 1 problem is access to capital," said Robert C. Embry Jr., president of the Abell Foundation. By agreeing to guarantee loans, the city could free more than $100 million in financing for local companies without spending nearly that much of its own money, Mr. Embry said.

Even Baltimore's $100 million empowerment zone grant, a development home run for which the Schmoke administration is directly responsible, has become the subject of bickering and second-guessing.

Some influential business people believe that instead of spending the money largely on drug treatment, job training, day care, recreation and small-business development, it should be trained on one or two big projects likely to spawn sizable, long-lasting job gains.

"It's very likely this unique opportunity is going to be frittered away," said Mr. Conte, the University of Baltimore economist.

Under current conditions, Baltimore is likely to continue to lose jobs, economists said. Urban analyst David Rusk believes Baltimore is one of 24 U.S. cities that have entered an economic twilight zone, "a statistical point of no return" of declining population, employment and income.

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