This month, like conquistadors of centuries past, tens of thousands of us will ascend the Andes to Quito, Ecuador, in search of El Dorado. But, unlike our brutal and greedy predecessors, we are not pursuing metallic wealth beyond our wildest dreams. The golden city we seek promises a sustainable urban future. Our map—the New Urban Agenda, which will be announced and adopted during Habitat III, the United Nations Conference on Housing and Sustainable Urban Development in October 2016—tells us where we are going, but it does not tell us how we will get there.

We know that we will encounter monumental challenges as we navigate this path to welcome some 2.5 billion people to the world’s cities over the next three decades. We will be tasked with providing jobs and housing for both these newcomers and current urban residents who are inadequately housed or underemployed. And we will have to make unprecedented investments in infrastructure to provide basic services for these new city dwellers. Our local governments will need to step up, as never before, to implement and finance measures to handle extraordinary growth. But while the bulk of responsibility for managing this last epoch of urbanization will fall on local governments, the rest of us are not off the hook. In fact, it is safe to say that the actions of other institutions—particularly national and subnational governments and certain NGOs—will determine whether urbanization succeeds. We will all need to pull together to find our way to larger, more inclusive, equitable, and sustainable El Dorados.

And here is how these golden cities will function. Local, provincial, and national governments will align and coordinate their actions to manage urban growth successfully. This sounds easy enough, but what will it mean in practical terms? It means that different levels of government will commit to getting urbanization right and adopt some new modus operandi. It means that higher levels of government will stop devolving expenditure responsibilities to lower levels of government without identifying or providing sufficient revenues to cover the expenditures. It means that national governments will provide local governments the statutory authority to raise their own funds to meet many of their own financial obligations. It means that we will ensure local governments have the capacity—both technical and human—to make efficient use of all available resources. And it means that national governments will commit to adapt and adjust their policies to match the changing needs of local governments and the contexts in which they work.

Powers conveyed and responsibilities mandated from higher levels of government to lower levels through constitutions and legislation will reflect strategic alignment. Resources transferred from higher government levels to lower levels through agencies or ministries will be less encumbered by earmarks or overbearing compliance rules. Local governments’ powers and responsibilities will be codified in constitutional and legislative “rules of the game” that define a better-groomed playing field. Rules that enable localities to manage their affairs—granting them the power to levy certain taxes and fees or the legal authority to enforce tax collection—will displace regulations that constrain the ability of localities to attend to their own needs, such as property tax rate limitations.

Playing by national rules will no longer be difficult or impossible for cities. Other municipal governments will follow Detroit’s lead and find ways to avoid leaving tens of millions of already-allocated federal dollars on the table as Detroit did in the years preceding its bankruptcy. They will seek assistance to overcome the staff deficits and technical limitations that led to Detroit’s failure to adequately manage federal funding, as noted in the 2015 Government Accounting Office (GAO) report. And they will not fault themselves for their inability to use that money; they will recognize that defects in the design of funding programs are to blame, given that many thriving cities are likewise unable to utilize all of their national funding. And they will know that their problems are not exceptions but rules, as hundreds of cities across the world acknowledge that efficient use, or under-use, of intergovernmental transfers is an almost insurmountable challenge. This is something that we will fix on our way to El Dorado.

But how will we detect and correct defects in the design of intergovernmental transfer programs? Where is the forum where rules of these games are reviewed and refined? It is not surprising that the GAO would conclude that the failure of federal funds to reach the ground is a problem of local capacity. How would the national government get enough objective distance to consider the idea that its programs and policies are ineffective because of bad design? National governments will create programs crafted to fulfill policy goals, not to frustrate local governments’ attempts to meet citizens’ needs. But how? To know whether their programs are working, they will talk about them with their local counterparts. Although these discussions rarely occur now, they will become commonplace. Productive feedback through honestly brokered conversations will ensure that the troops on the ground are on the same page as the legislature and its ministries. And vice versa.

And this is where other key institutions will play a role. Specifically, NGOs and quasi-governmental organizations will connect the work of policy implementers with policy makers. Some institutions are familiar with the work of local governments and trusted by them as partners, but they also have access to and credibility with national leaders and policy makers. These organizations can serve as honest brokers and conveners to bridge the communication gap between policy conception and implementation and help to improve both. Hundreds of these mediators, or “conversation conduits”—including multilateral funders and social-change philanthropists, think tanks and practice-oriented departments of universities, membership organizations of public officials and development lenders, and the Lincoln Institute of Land Policy—will work together to complete a “virtuous circle” that leads to better policies and aligns the efforts of multiple levels of government to achieve the goals of sustainable urbanization. And they will develop and deliver training and technical assistance to build the capacity of local governments.

It is a bold vision of the future. But without efforts like these, it is hard to imagine how we will achieve the goals of the New Urban Agenda. A significant share of the approximately 4,300 cities in the world with populations greater than 100,000 can use some help to grow their skills and systems, and to communicate better with higher levels of government. And many of them are hungry for the help.

We started on this path with the launch of our global campaign for municipal fiscal health two years ago at a congressional briefing where we were invited to talk about the challenges that perpetuate weak economic performance of older industrial American cities. We will follow next spring with a roundtable co-convened with the Pew Charitable Trusts (a fellow mediator) to present findings from a study of unspent federal grants that we have underway with planning students from Northeastern University (another mediator). We will invite representatives from federal agencies to explore the implications of the findings for reforming formula-funding programs. In addition, we have begun to design and offer training modules to build capacity and technical assistance for cities. But we need help—a lot of it.

Let’s take advantage of the Habitat III meeting to network the institutions that want to help cities make efficient use of intergovernmental transfers and other resources—through policy dialogues convened with national governments, or through capacity building programs for local governments, or both. This effort requires more resources and skills than any of us can mobilize individually. We need to tackle this challenge together. The Lincoln Institute is ready to participate in a global effort to empower cities to solve their own problems, and we will identify others to begin the process of mobilizing and coordinating a new global practice. Please seek us out in Quito if you want to learn more about what we are doing and how we might work together.

We will not get another chance to get urbanization right. By the middle of this century, 70 percent of humanity will reside in cities. We must ensure that they are the cities we need. Habitat III is a rare occasion when national governments focus on their urban centers and the outsized role they play in their nations’ futures. Let’s use this moment to focus our collective efforts to implement the New Urban Agenda in the next two decades, and travel together on the road to a new El Dorado.

Photograph by pxhidalgo / iStockPhoto

Holyoke, a city of about 40,000 in western Massachusetts, was one of the nation’s first planned industrial communities. Beginning in the late 1840s, Boston investors transformed what had been a farming area into a mill town, taking advantage of its location along the Connecticut River. The investors wanted to manufacture cotton textiles. But over time an elaborate canal system was built in the city to accommodate more and more mills, and the town became known for silk, wool, and paper manufacturing as well. In time, Holyoke came to be known as the “Paper City” because of its paper mills.

As the mills developed, the city prospered. With jobs plentiful, the town attracted successive waves of Irish, French-Canadian, German, Polish, Jewish, Italian, and Puerto Rican immigrants who worked in the mills, created small businesses, raised families, and built a city that reached a population of 63,000 by 1917 (McLaughlin Green 1939).

Then it all began to come apart—slowly. From a peak in the 1920s, local industry gradually declined as companies and jobs moved overseas or migrated to the South and West to be nearer raw materials and cheaper labor. By the time of the 2000 census, Holyoke’s population had shrunk to fewer than 40,000. Like other small industrial towns across the country, it was part of a fading era in the American industrial past, and the once-prosperous Paper City was fighting to keep its economic footing.

Fortunately, Holyoke had a big stroke of luck in 2009, when the city was selected as the site for what came to be known as the Massachusetts Green High Performance Computing Center (MGHPCC)—an environmentally friendly supercomputing complex intended to bolster what state officials call the Massachusetts “innovation economy.” Water power was once again key to the city’s success. Holyoke’s location on the banks of the Connecticut River offered access to low-cost hydroelectric power, while the river and the city’s many canals offered water for cooling, a major advantage in supercomputing. “Holyoke has struggled after losing its industry base,” says Kathleen Anderson, president of the Greater Holyoke Chamber of Commerce. “We had aging infrastructure that needed to be repurposed, loss of jobs, and other changing demographics. Holyoke had to think in creative ways and recognize the assets we had. Both human talent and the wisdom of acquiring the dam and its hydropower have been foundational to our rebirth.”

When the computer center opened in 2012, it represented an important first step toward improving Holyoke’s fortunes, but it wasn’t enough to restore its vitality. The city undertook a planning effort that produced a 20-year renewal plan to revitalize and redevelop the area where the MGHPCC is located, in the center of town. An important step in realizing the plan was the creation of the Holyoke Innovation District—an investment the state made through the Massachusetts Technology Collaborative that brought together local officials, business leaders, and community organizations to encourage local and regional economic development. “The attraction of the computing center to Holyoke really started our planning process around the Holyoke Innovation District. Really, we say it spawned out from the computing center,” Marcos Marrero, Holyoke director for planning and economic development and co-chair of the Holyoke Innovation District, said in a September interview (Desmarais 2015) with the Bay State Banner.

Leadership, Collaboration, Resurgence

That’s when the Boston Federal Reserve Bank entered the picture. Since 2008, the bank’s research staff had been studying older industrial cities like Holyoke as part of an effort to help revitalize another Massachusetts city, Springfield. Like Holyoke, it had seen better days. The bank conducted a two-year study partnership with Springfield that examined the challenges facing the state’s fourth-largest city, which continued to fail even as state government and nonprofits poured millions of dollars into revitalization.

One part of the study tried to glean lessons for Springfield from the fates of 25 other small industrial cities in the Northeast, Midwest, and upper South. The Boston Fed’s economists found that a handful of these cities had been able to either maintain or recover much of their economic stability, as measured by income, poverty rates, population, and economic vitality. Boston Fed researchers called them “resurgent cities,” and the researchers looked for common themes that explained their success. The cities, they found, faced similar challenges—poverty, changes in racial and ethnic makeup, and the loss of their manufacturing bases. But all were fighting through their challenges and shared a key driver of success: sustained leadership and collaboration among businesses, government, nonprofits, and community groups. “Time and again, our examination of the resurgent cities’ histories indicated that the resurgence involved leadership on the part of key institutions or individuals, along with collaboration among the various constituencies with an interest in economic development,” bank researchers wrote in a 2009 report (Kodrzycki and Muñoz 2009).

The bank researchers noticed that the source of local leadership varied from place to place. In New Haven, Connecticut, local colleges and universities worked with government officials and private industry to provide workforce training and funding to attract companies. In Providence, a nonprofit foundation worked with business executives to develop ideas and a consensus on downtown development projects. In Evansville, Indiana, a mayor initiated the turnaround in the 1960s, and it continued, thanks to an aggressive economic development campaign by the local chamber of commerce later on. Despite their differences, all these economic redevelopment efforts spanned decades, implying solid ongoing leadership.

All the efforts demonstrated the active collaboration of numerous groups and individuals as well. According to the Fed’s research, “Collaboration became necessary because economic transformation is complex, and because outsiders—such as state and national governments, foundations, and businesses that are potential sources of funding and jobs—often require proof of joint efforts in order to contribute to a city’s development.”

Rising to the Challenge

These findings led the Boston Fed to ask what it could do to help build the strong civic infrastructure that was critical to resurgence. The result was the Working Cities Challenge, which the bank created with the help of Living Cities, a New York–based collaboration of 22 foundations, financial institutions, and other partners.

The Challenge took the form of a competition among the smaller former industrial cities in Massachusetts. In the spring of 2013, 20 communities applied to participate. From the applicants, six cities were selected to receive a total of $1.8 million in grants to support projects that emphasize leadership and collaboration. Among the first six winners was Holyoke, along with Chelsea, Fitchburg, Lawrence, Salem, and Somerville. The goal was simple: to help save these struggling Massachusetts cities by supporting development of the tools they needed to help themselves.

The program was an important and unusual one for a federal reserve bank. The banks are better known for cranking out economic research than for mounting programs in the field. However, the initiative reflected Boston Fed President Eric Rosengren’s commitment to applying the bank’s economic research to the real world and to improving New England communities. And the concept is scalable, with nationwide potential to bolster cities and towns across the country that have struggled with 21st-century economic realities.

Tamar Kotelchuck, director of the Working Cities Challenge, says that the bank’s research on resurgent cities taught them that most struggling cities can do better. “Based on what we learned from studying resurgent cities, we got together with Living Cities and came up with the idea of a competition for multiyear funding to incentivize leadership and collaboration,” she says.

She says the bank decided to start with a pilot program in Massachusetts, with a focus on small and midsize cities. The target cities range in size from about 35,000 to 250,000 and share certain economic and demographic similarities, including a large number of poor families and low median incomes. “These cities had already formed a coalition to support their interests with the help of MassINC, a local think tank,” Kotelchuck says. “They called themselves Gateway Cities and had been working together on common economic and political problems for a few years. They had learned that working together gave them a certain amount of power that none had alone,” she says (Forman et. al. 2007).

Working Cities took a singular approach in attempting to help these cities, according to Andrew Reschovsky, a fellow at the Lincoln Institute. “What is unique about the Working Cities initiative is that, unlike many other urban economic development strategies, its focus is on improving the economic well-being of each city’s current low-income residents.”

The federal reserve banks can’t use their own funding to provide grants, but a number of willing partners stepped forward to aid Working Cities. Kotelchuck says the Fed’s role in the initiative includes designing and implementing the model in partnership with a steering committee, providing technical assistance, and helping teams build capacity through expert assistance, networking, and best practices. The grants are funded by several donors, including the state government; Living Cities; the Massachusetts Competitive Partnership, an association of the 16 largest employers in Massachusetts, focused on promoting economic growth; and MassDevelopment, the state’s development agency.

Kotelchuck says that when the bank and its partners put together the first competition in 2013, they left it up to the cities to propose how the grant funding would be used. “We didn’t tell cities what to work on,” she says. “The challenge is designed to help build collaboration around issues that are important locally.” A major requirement for a successful project, though, was that it should involve the private sector, government, and other local groups working together. “We were looking for projects that promoted systemic change,” she says. “Our goal was intended to help local leaders fix things in their cities.”

An independent jury evaluated the cities’ proposals based on criteria that reflect the Working Cities Challenge goals of collaboration, community engagement, and the use of evidence to track progress. The projects had to make a lasting contribution to improving the lives of low-income residents.

In January 2014, the first awards were announced. Of the six cities selected, four received multiyear grants, and two received seed awards. All the cities were combatting high unemployment, low student achievement, and an uncertain future. However, Kotelchuck says, “All the winning cities had distinctive proposals. No two were alike. They all addressed specific local needs, just as we had hoped,” she says.

For example, Fitchburg in north-central Massachusetts received a three-year grant of $400,000 for its eCarenomics Initiative—an effort to develop shared metrics for neighborhood health and well-being, with the goal of improving one part of town. Chelsea won a three-year grant for its Shurtleff-Bellingham Initiative, designed to reduce poverty and mobility rates by 30 percent in the struggling neighborhood. Salem received a $100,000 seed grant for its plan to bring one low-income neighborhood’s economic indicators in line with the rest of the city by focusing on economic development, small business development, workforce development, and leadership development. Somerville also received a one-year seed grant of $100,000 to support a workforce training program for out-of-school “youth” aged 18 to 24.

The largest single award, a $700,000 three-year grant, went to Lawrence in the northeastern part of the state. The award was for the Lawrence Working Families Initiative, whose goal was to create a Family Resource Center designed to increase the incomes of parents of local school children by 15 percent over a 10-year period. The initiative is led by Lawrence Community Works and the local school system, with support from several employers and nonprofits in the area. “The Lawrence school system had gone into receivership in 2011,” Kotelchuck explained, so focusing on families and schools was a logical choice.

The city also had economic characteristics that fit the Working Cities’ model. Its median household income was half the statewide median, and its poverty rate was almost triple the statewide rate. “The city’s population is 70 percent Hispanic, and unemployment was a problem,” Kotelchuck says. Many of the problems the city faced spilled over into the schools. “The goal of the Family Resource Center is to help families in as many ways as possible. It provides financial coaching, crisis support, and other services to strengthen families,” she says.

Beyond the family center, a large part of the initiative is focused on what Kotelchuck calls “authentic parent involvement” in the schools. The initiative created community education circles where parents, teachers, and students work on specific problems in the schools. “The goal is to get parent buy-in and involvement in the school system,” she says. So far, the program has involved 400 parents, hired a family coach, and placed more than 30 parents in jobs, according to Kotelchuck.

Holyoke received a $250,000, three-year award that is being used to implement SPARK (Stimulating Potential, Accessing Resource Knowledge). This downtown “entrepreneurship and social venture development center” aims to increase business ownership, particularly among the city’s residents, including the Latino population, which accounts for 60 percent of the population. The project team that created the program is made up of representatives from the city, the chamber of commerce, the Holyoke Public Library, a one-stop employment center called CareerPoint, and the local nonprofit Nuestras Raíces.

The SPARK program is “geared toward identifying, recruiting, and stimulating Holyoke residents and organizations that have a ‘spark’ or desire to move their innovative projects or business proposals from concept to reality by emphasizing a whole-community approach to entrepreneurialism, individual learning, and leadership training,” according to the city. In short, it’s designed to help prospective business owners establish business plans and figure out how to get operating.

Another goal is to tie members of the downtown Holyoke community into the Innovation District the city created around the supercomputing center. “The city has a big data center,” Kotelchuck says. “But that alone won’t necessarily help Holyoke’s low-income people. The question that SPARK addresses is how do you build upon the assets of Holyoke’s immigrant population and make sure people benefit from the development that’s going on around the innovation district.”

City officials agree. “This award is more great news for the future of the city’s Innovation District,” Mayor Alex Morse said when the grant was announced. “We’ve been working hard to position Holyoke to compete in the modern economy, which requires us to stimulate innovative projects and business ventures. With the collaboration of some of Holyoke’s finest organizations and community leaders, this funding will allow us to assist local residents in bringing their innovative ideas to fruition.”

Kotelchuck says that many cities try to attract young professionals and focus on tech jobs. They see other cities succeed using that model and copy it, but not always successfully. “If we don’t help low-income residents,” she says, “all we’re doing is moving poverty from place to place, and that helps no one. The Working Cities initiative helps people where they live. It helps people who wouldn’t otherwise have jobs.”

“Many cities chase the newest, flashiest strategy to revitalize themselves, but ultimately it’s not the newest trend that revitalizes a city,” she says. “It’s the effects of many ideas over time, and it only happens in cities with community engagement and collaboration. Our advice is to look at what you have and build systematically on it.”

She says that in monitoring the Challenge, she has noted differences in how cities think about their futures. “Some cities say: We have so many problems; give us some money,” she says. “But others say: We have these resources. We have some energy. We need help realizing our potential.” She says that revitalization efforts will require a decade of effort or more. The Fed’s goal is to provide a three-year leg up on the effort.

It can also spark broader interest in the cities’ revitalization. Recently, Holyoke SPARK received an additional $56,000 from the Massachusetts Growth Capital Corp., a quasi-public agency that supports small businesses, to help the program offer more classes, provide mentoring for entrepreneurs, and support a micro-enterprise loan program for those who qualify. It also received additional funding from the city’s Community Development Block Grant this year.

Signs of Progress

The Fed and its partners are happy with the project’s results so far, Kotelchuck says. And the bank recently announced a second and third round of grants, for cities in Massachusetts and Rhode Island. Eventually, she thinks the idea could spread to other Federal Reserve districts. “It’s a new model for Fed involvement in these communities. Other Feds are showing interest, and we would be delighted if it takes root in other districts.” Bank President Rosengren says that the Boston Fed plans to expand the program to other New England states at the very least.

The Working Cities program shows great potential to spread farther. Small cities and towns all over the country have been batted around by changing economic fortunes in recent decades. They deserve a chance at becoming resurgent cities too, and it’s gratifying to see an organization like the Boston Fed putting its brains and influence behind improving their future. There is no silver bullet, no guarantee of success, but the Working Cities Challenge shows that good things can happen with time, commitment, elbow grease—and a little money.

This point was underscored by the Lincoln Institute’s Reschovsky: “Although all the cities currently involved in Working Cities need more economic and fiscal resources, the key to the success of the initiative will be the combination of additional resources and the development and nurturing of local nonprofit, government, business, and social institutions.”

That certainly seems to be the case in Holyoke. Lately, it has even developed a little national “buzz.” In the February issue of Popular Mechanics magazine, the editors designated the nation’s 14 best startup cities, saying they wanted to identify “the next wave of cities building an ecosystem to turn innovators into entrepreneurs.” The list features smaller cities from across the country. Holyoke made the list at number six (Popular Mechanics 2015).

Inevitably, the city’s chief advantage is a familiar one. “We have cheap energy,” Mayor Morse wrote in a description of innovation in Holyoke for the magazine. “On the city’s eastern border, the Connecticut River drops 57 feet as it presses south. When the city was founded, in 1850, the river powered waterwheels for paper mills; today it generates inexpensive, clean energy.” He also mentioned the brick paper mills, signs of the industrial past that have been repurposed as “attractive industrial work spaces.”

“Holyoke has gone back to where we started,” the Chamber’s Anderson says. “Our ancestors dug a canal system to harness power, and now we are still harnessing it as green energy to power a new economy.”

Billy Hamilton is executive vice chancellor and chief financial officer of the Texas A&M University System. He was for 16 years the deputy comptroller of public accounts for the State of Texas. Since 2007, he has written a weekly column for State Tax Notes.

Photograph by Jeffrey Byrnes

References

Desmarais, Martin. 2015. “The Holyoke Innovation District Finds Creative Solutions to Revitalizing the City.” The Bay State Banner. September 10, 2015. baystatebanner.com/news/2015/sep/10/holyoke-innovation-district-finds-creative-solutio/?page=3

Forman, Benjamin, David Warren, Eric McLean-Shinaman, John Schneider, Mark Muro, and Rebecca Sohmer. 2007. Reconnecting Massachusetts Gateway Cities: Lessons Learned and an Agenda for Renewal. The Brookings Institution and MassINC. February 2007.

Kodrzycki, Yolanda and Ana Patricia Muñoz. 2009. “Lessons from Resurgent Cities.” Federal Reserve Bank of Boston. 2009 Annual Report. www.bostonfed.org/about/ar/ar2009/lessons-from-resurgent-cities.pdf

McLaughlin Green, Constance. 1939. Holyoke, Massachusetts: A Case History of the Industrial Revolution in America. New Haven, Connecticut: Yale University Press.

Popular Mechanics. 2015. “The 14 Best Startup Cities in America.” Popular Mechanics. February 2015. www.popularmechanics.com/culture/advertorial/g1859/the-14-best-startup-cities-in-america