Rival Economic Models: Atlantic City vs. Coney Island

As Jane Jacobs once noted in The Economy of Cities, regional economies tend to weaken when they become overly reliant on a single industry. For instance, the Appalachian Mountains, North Carolina, and Michigan all suffered when coal, textiles, and automobiles respectively entered periods of cyclical decline.

In these three cases, though, the industries slowly developed into positions of regional economic dominance over extended periods of time. And even though governmental policies undoubtedly supported their development, the industries primarily benefitted from a wide array of natural, environmental, and human resources that existed in the regions.

There are times, though, when local government officials strive to create dominant industries from “scratch” when such supporting resources don’t exist at all. One such situation is Atlantic City, New Jersey, a fading summer beach resort that rushed headlong into the casino gambling industry on a massive scale during the 1970s. At the time, New Jersey officials hoped that Atlantic City would grow to become “the Playground of the World and the major hospitality center of the Eastern United States.”

Even as recently as last year, New Jersey Governor Chris Christie pledged $261 million of taxpayer funds to support Revel, a $2.4 billion resort project. So what return did New Jersey earn on its taxpayer investments?

In a word (or three), not very much! In fact, just last week, Revel declared bankruptcy for the second time. It followed Caesar’s Entertainment, which had announced a few days earlier that it would shut down the Showboat Casino. These followed the closure of the Atlantic Club, which shut down five months ago.

Interestingly, just two hours north of Atlantic City, another fading beach resort that had considered a massive casino development strategy appears to be making more significant economic progress. Two weeks ago, the Coney Island neighborhood of Brooklyn, New York celebrated the launch of the Thunderbolt roller coaster.

Decades ago, the Coney Island amusement parks were anchored by two classic wooden roller coasters, known as the Cyclone and the Thunderbolt, and a giant Ferris wheel called the Wonder Wheel. Although the original Cyclone and Wonder Wheel remain in operation, the original Thunderbolt ceased operations in 1982 and was demolished in 2000.

Consistent with an economic development strategy that focuses on small scale amusements, the new Thunderbolt joins such entertainment options as Minor League Baseball games and Major League Eating competitions. Has this strategy been successful? Very much so; for instance, the global cable sports network ESPN has committed resources to the region, agreeing to broadcast the July 4th Nathan’s Hot Dog Eating Contest through 2017.

It’s possible, to be sure, that Coney Island’s economic development strategy will ultimately fail to the same extent as Atlantic City’s strategy. After all, as Jane Jacobs noted, a unilateral focus on any single economic engine — whether it is trained on relatively inexpensive entertainment options or on very costly casino projects — carries a significant degree of risk.

At the moment, though, it appears that the low cost / low risk entertainment projects of New York are producing far better results than the high cost / high risk casinos of New Jersey. If you doubt it, you might wish to tune into the Nathan’s contest this Friday and see for yourself!

The Big Apple Vs. The City Of Angels

The world of late night television buzzed with excitement last week over the launch of the Jimmy Fallon “era” of The Tonight Show. Fallon is just the sixth permanent host in the 60 year history of the show, a television institution that has been hosted by Johnny Carson and Jay Leno during 51 of the past 52 years.

Many industry commentators have also praised the NBC television network’s decision to return the show to its ancestral New York City roots from its long time home in southern California. Carson originally moved the show west in 1972, during a period when New York City was disintegrating and Los Angeles was booming in population and economic wealth.

At the time, the Big Apple was in the midst of a sickening municipal decline that would hit bottom with a close brush with bankruptcy three years later. Period films like Taxi Driver and Death Wish depicted the metropolis as a city with striking poverty and rampant crime, while television shows like The Brady Bunch and Three’s Company portrayed southern California as a land of eternal sun and easy living.

So how did New York City later manage to resurrect its fortunes so thoroughly? Why is the return of The Tonight Show now perceived as a reasonable business strategy? And when did Los Angeles manage to lose its aura of inevitable economic growth?

If urban planning expert Jane Jacobs were still alive, she would likely point to New York’s success in diversifying its economic base. In her landmark books The Death And Life Of Great American Cities and The Economy Of Cities, Jacobs noted how fiscal (as well as cultural) diversification enables regions to transition from fading industrial sectors to rising ones.

Indeed, forty years ago, New York’s economy was heavily focused on Wall Street finance. And Los Angeles’ economy was similarly focused on the entertainment industry.

Over the past several decades, however, the Big Apple’s economy has expanded into global tourism, trade, and technology. And today, even light manufacturing is making a comeback in places like the Brooklyn Navy Yard and Industry City.

The economy of Los Angeles, however, remains heavily focused on the entertainment industry. Like Detroit and its automobile manufacturers, or Hartford and its insurance companies, the City of Angels is struggling to maintain its dominance in the one industry sector that has served as its engine for growth.

If you were Mayor Eric Garcetti of the City of Los Angeles, would you respond to the region’s loss of the Tonight Show by refocusing your economic development efforts on strengthening the entertainment industry? Or would you shift your focus to diversifying into other industries?

The Shrinking Freedom Tower

Do you remember the Freedom Tower? First proposed in the aftermath of 9/11, the building was meant to replace the Twin Towers in the skyline of Lower Manhattan and in the psyche of a traumatized nation. Its spire, soaring high above the skyline, was designed by architect Daniel Libeskind to serve as a symbolic companion to the upraised torch of the Statue of Liberty.

But the size and scope of the entire Tower complex was controversial from the very beginning. Mayor Rudolph Giuliani, for instance, assertively opined that the entire World Trade Center site should be leveled and converted into a memorial park. And developer Larry Silverstein, who owned the rights of development as a result of having signed a 99 year lease for the Twin Towers just six weeks prior to 9/11, decided that certain secondary buildings within the complex would shrink significantly.

The building itself was renamed 1 World Trade Center in 2009, and was redesigned on several occasions to restore a sense of scale to the surrounding community. Although its construction shell is now rising above the skyline, the development project shrank last week in a highly symbolic manner.

From 1776 to 1368

Until last week, the roof of the building of 1 World Trade Center was planned to tower 1,368 feet above the ground, topped by a 408 foot spire encasing a broadcast television antenna. Thus, the total height of the structure was designed to reach 1,776 feet, a number that represented the year of independence of the American nation.

But last week, the spire was eliminated from the construction plans for reasons of financial and operational efficiency, leaving a 1,368 foot building with a bare antenna perched upon its peak. 1368? That was the year of the establishment of China’s famed Ming Dynasty, hardly a number to be celebrated by the new World Trade Center, albeit a noteworthy cultural event without doubt!

The international Council on Tall Buildings and Urban Habitat weighed in on the decision, raising the possibility that it might preserve the 1,776 foot height by simply declaring the antenna to be part of the physical structure of the Center. Even at 1,776 feet, however, the building would fall far short of the height reached by Dubai’s 2,716 foot Burj Khalifa Tower, a building that was explicitly designed to outdistance future rivals and to maintain its title as World’s Tallest Structure indefinitely.

Imposing Structures, Disappointing Economics

All of the hulaballoo regarding the height of New York’s new World Trade Center, however, serves to obscure a simple fact of economics. Namely, the economics of such imposing structures often fail to satisfy the financial expectations of their developers.

Consider the Empire State Building, for instance. Built in the darkest days of the Great Depression, the edifice remained under-utilized for many years and was known as the Empty State Building. And the Burj Khalifa itself owes its existence to a monetary bailout by the government of Abu Dhabi, eventually naming itself after the government official who provided emergency financial aid.

The original World Trade Center development project  in New York City was likewise blamed for wiping out a ramshackle but lively business district called Radio Row. Although the financial service industry tenants of the Twin Towers undoubtedly paid higher rents than the electronics stores and repair shops that preceded it, many believe that the Towers simply attracted tenants that would have otherwise remained in other Manhattan office towers, thereby depressing office rents throughout the region.

In other words, the Towers may have simply shifted banks and ivestment firms around on the local street map. At the same time, they may have contributed to the decline of the Big Apple’s once-thriving manufacturing base.

Symbolism vs. Functionality

Most of the great man-made structures of the world have become symbolic icons because of their success in fulfilling their original functions. The Pyramids of Egypt, for instance, initially served as tombs for the Great Pharaohs. The Great Wall of China helped defend the medieval Asian nation from invasions by northern armies. And the Brooklyn Bridge provided a transportation link that physically contributed to the integration of New York City and metaphorically symbolized the development of its fabled immigrant Melting Pot.

But the spire of the Freedom Tower was not designed to serve a function. Instead, it was conceptualized as a purely symbolic feature. And, accordingly, it failed to survive the pragmatic construction phase of the building project.

Will the failure of the newly named 1 World Trade Center to achieve a height of precisely 1,776 feet persuade a single potential tenant to select a different building for its office workers? If the answer is indeed ‘no,’ then the developer’s recent decision may well represent a healthy refocusing on the economics of projects  as the primary force behind construction decisions. In other words, a ‘no’ to pure symbolism may disappoint a few historians, but it should please the constituents who hold a stake in the project’s success.