How Cities Make Money
by Gar Alperovitz
The New York Times, February 10, 1994, Section A; Page 23.Copyright 1994 The New York Times Company

First on the list of challenges facing Mayor Rudolph W. Giuliani is the $2.3 billion budget deficit. Beyond proposals already put forward, he might find surprising answers to the fiscal crisis by looking to scores of little-known innovative efforts under way in diverse communities across the nation.

The projects, sponsored by Democrats and Republicans, take two forms: first, new ways for cities to make money on profitable ventures; second, support for taxpaying neighborhood and worker-owned companies that are so anchored in their communities that they cannot easily move when there are greener fields elsewhere.

Consider these moneymaking ventures:

A methane recovery system at a landfill owned by Riverview, Mich., produces electricity that is sold to Detroit Edison; royalties covered initial costs in the first two years and now add to Riverview's cash flow.

A sewage-treatment plant owned by Milwaukee transforms 50,000 tons of sludge into marketable fertilizer and produces $6.5 million to $7 million in revenues a year.

Seven public authorities in Orlando, Fla., generate 19 percent of the city's total revenues (more than $71 million last year). These include a performing arts center, several stadiums, solid-waste and waste-water funds and a golf course.

The Green Bay Packers football team is owned by a nonprofit community-owned corporation that can never leave Green Bay, Wis. All profits are reinvested in the team or used for rent, upkeep and development of the city-owned stadium; the Packers also pay state and city taxes.

A local authority in San Bruno, Calif., operates an efficient cable television system, with basic rates one-third less than typical private operations, and returns 5 percent of gross revenues and 10 percent of equity earnings to the city.

In many cities, profits from municipally owned electric utilities help finance other services and thus reduce the tax burden.

Mr. Giuliani should order full-throttle use of his panoply of economic tools -- loans, contracts, technical assistance, tax abatements, grants -- to nurture small worker-owned and neighborhood-based companies. He can learn from other municipalities.

Coastal Enterprises, a community development corporation in Wiscasset, Me., has provided more than $90 million in direct assistance and loans to dozens of small enterprises in Maine -- defense industry conversion; fish processing, freezing and marketing; sheep development, and environmental technology industries.

In Pewaukee, Wis., Quad/Graphics, a 6,700-person printing operation that is 80 percent worker-owned, produces major magazines; revenues have been increasing 40 to 50 percent a year.

Republic Engineered Steels in Massillon, Ohio, a worker-owned company with 5,000 employees, has more than doubled its profits in 1993, to more than $33 million.

The nonprofit Community Development Corporation of Kansas City, Mo., is about to add a big addition to its Linwood Shopping Center. It also operates a concrete company that produces 60 percent of the cement blocks used in the Kansas City area.

The Delta Foundation community development corporation in Greenville, Miss., owns and operates five manufacturing companies and produces blue jeans, electro-mechanical switches, folding attic stairs, railroad spikes and rubber products.

New York has timidly flirted with innovation. The Economic Development Corporation even made $35 million in profits last year, and modest city contracts have helped the Bedford-Stuyvesant Restoration Corporation, a community development corporation, which, among other things, operates a 300,000-square-foot commercial center.

Taken together, undertaking moneymaking ventures and nurturing taxpaying neighborhood business would help put New York on the cutting edge of municipal strategies.