Making a Magnet: Baltimore’s Fledgling High-Tech Community May Be the Key to Rebuilding the City and Slowing Sprawl

By Van Smith

Published in City Paper, Sept. 1, 1999

Vice president Al Gore calls it “Building Livable Communities.” Maryland Gov. Parris Glendening calls its “Smart Growth.” But the two Democrats are talking about the same thing: Public policies that emphasize new investment in existing communities rather than in the fast-expanding fringe of metropolitan areas. Opponents say this idea is a Trojan horse for bigger government, but the goal is something many voters support strongly — slowing the spread of what both Gore and Glendening call a “monster”: suburban sprawl.

The vice president and the governor share another prescription for promoting a healthy, balanced economy. Gore’s slogan is “building American prosperity in the Information Age”; Glendening calls it “Maryland’s technology revolution.” Both want to encourage continued expansion of an industry that has spurred an unprecedented creation of wealth in America during the 1990s: high technology, that broad area of economic activity that seeks to harness the fruits of the scientific frontier for commercial use. High-tech is the potent heart of what many have come to call “the new economy.”

What neither leader explicitly acknowledges is that sprawl and the new economy are closely linked — a point first made by Fred Siegel, a history professor and urbanologist at the New York college Cooper Union. (The author of this article worked for Siegel as a researcher earlier this year.) The phenomenal expansion of the suburbs in recent years has been fueled first and foremost by the technology boom. The challenge, if the state and the nation are going to beat back sprawl and encourage the technology revolution, is to induce the new economy to choose cities and older suburbs over the green, cheap fields of exurbia.

That won’t be easy, but there are hints that it may already be happening — albeit in a limited fashion — in Baltimore. Some boosters are touting the city as a budding magnet for the fast-growing, fast-moving high-tech sector, particularly for that corner known as “new media,” which focuses on advertising, selling, and communicating through computers.

Available data about high-tech jobs and businesses show that Baltimore City’s participation in the new economy is lagging significantly behind that of the surrounding counties, where sprawl has become a critical issue. Despite the presence of big medical-research institutions (Johns Hopkins, the University of Maryland), which traditionally spin off biotechnology start-ups, the city’s high-tech numbers don’t measure up to those of its neighbors, according to data from state agencies.

But in the fast-moving world of the Information Age, data tends to lag behind reality. A look around the city quickly makes clear that Baltimore is home to a growing and largely unnoticed high-tech sector — not just biotechnology, which the city is already known for, but information and computer technology. The Can Company in Canton, the Bagby Building in Little Italy, and even the Inner Harbor’s Power Plant are home to new or expanding high-tech ventures — evidence that tech types like working in funkily rehabbed industrial artifacts. And Baltimore has plenty of those.

Inner Harbor East and another planned development at a defunct Proctor & Gamble plant in Locust Point are expected to draw more technology tenants to the city. Some business leaders predict that the controversial west-side redevelopment project will also draw high-tech investment that could preserve some of the historic structures currently at risk of being demolished.

To lend techies a sense of community — considered to be of supreme importance in any technology-savvy economic-development strategy — the regional business group the Greater Baltimore Committee spun off a new organization earlier this year: the Greater Baltimore Technology Council, headed by Penny Lewandowski, an exuberant veteran of Washington, D.C.’s successful tech-promotion effort.

Before anyone gets too excited about Baltimore’s high-tech future and making sprawl a thing of the past, it’s important to examine the obstacles — and some unpredictable factors that come into play. Even if individuals and tech enterprises pondering Baltimore overlook the city’s crime statistics and social ills, they still face a labor force ill-prepared to meet the demands of technology jobs. Then there is the issue of regionalism: Baltimore will be competing with surrounding jurisdictions trying to attract companies, and the ‘burbs have more attractive tax structures and more available land to explore for locations. Finally, there are unforeseen circumstances — such as the current drought, which is already causing farmers to put their land on the market for development (and hence sprawl), and the possibility of a downturn in the business cycle, which would lead to economic contraction and less investment everywhere.

Such pitfalls notwithstanding, Smart Growth and high-tech are high priorities in Maryland and on the presidential-campaign trail, and voters and business leaders alike are going to be hearing more and more about them. For Baltimore City, which has failed to hitch its wagon to the economic gravy train that’s been rolling across the country and the region during the last several years, this strategy may be the last chance to rebound for a long time to come. “Shame on us,” developer William Struever says, “if we don’t all come together and recognize this opportunity.”
In June, the Home Builders of Maryland held a conference at the Columbia Hilton to discuss Smart Growth. The keynote speaker was Joel Kotkin, a professor of public policy at Pepperdine University in Southern California and an energetic student of what makes cities tick. Kotkin wholeheartedly embraces the idea that the market, not government, is the best arbiter of prickly issues such as suburban sprawl. The key, he suggests, is to bring cities such as Baltimore back to life, make them competitive in ways that will attract new people and businesses, and let market preferences take care of tempering runaway sprawl.

Home builders and other developers tend to quake at the mention of sprawl. The issue has them in a bind. They claim to be chasing the demand for more and more space farther and farther from urban centers, but the constituency the developers say they are trying to serve has grown resentful of the bulldozers clearing open land and replacing it with cookie-cutter tract housing, office parks, malls, and parking lots. Sprawl was created by suburban migration, but increasingly the migrants are saying enough is enough, as the traffic congestion, pollution, crowded schools, and social ills they left the city to escape have followed them outward. Environmentalists, with good reason, see sprawl’s effects in the poor health of the Chesapeake Bay and its tributaries.

Kotkin’s audience of developers smells the threat of land-use regulation in all the anti-sprawl talk, but they also sense a market-based demand for a fundamental change in the way development is done, and they know the writing is on the wall. “We have to look at the market,” Kotkin tells them. “We have to look at the competition between different kinds of areas as our best way of dealing with the sprawl issue and the growth-management issue.”

In the face of conventional wisdom that the suburbs and exurbs, with their plentiful land, are ground zero for development, Kotkin says cities such as Baltimore have some advantages that can help them compete.

What helped give the suburbs an edge in the first place — what created “the economic conditions for sprawl,” in Kotkin’s words — was the shift to “a knowledge-based society. . . . Knowledge is the primary resource and the traditional factors of production are no longer tied to particular places” — places with a certain kind of infrastructure, or accessibility to a port or raw materials. This new reality created what Kotkin calls “nerdistans: places where nerds like to live. A nerdistan is generally in the outer fringes, and high-tech companies generally are going to go to the nerdistans.”

But high-tech isn’t exclusively attracted to nerdistans, Kotkin continues. “Cities do have a niche in the new economy, [attracting] the group where the single largest disadvantage of cities — the education system — doesn’t matter. Single people, gay, double-income-no-children, empty nesters, Generation Y, the yuppies — these are groups that are increasing in population. One-third of the baby-boomer generation is single, childless, or only has one child. That’s going to be a major factor as we start to see fewer and fewer people who have to live in the suburbs because of family reasons . . . and start to see resettlement of the downtowns. It’s the beginning of a new urban demographic.”

On top of that, Kotkin says, Baltimore has one of the characteristics the new urbanists are looking for: old urban settings. “Baltimore has the environment, it has the architecture, it has the kind of vistas, the kind of cultural institutions which are going to attract them.”

In this light, he says, the question becomes, “What part of this new economy makes sense for Baltimore to go after?” The answer, he suggests, is the so-called “new media” — people focused on harnessing computer technology and the Internet to expand and improve communication and the flow of information, such as Web-site designers and online publishers. The new-media industry is growing, Kotkin says, “and that growth tends toward the cities. It attracts younger people, freelancers, the creatives. They don’t like the very things that the nerds like. The chaos and excitement of the cities attracts the creatives.

“So this is really where I see the future of the cities going, and we might see a much more appropriate dispersion of growth as a result — that kind of strong headlocking of competition [between cities and suburbs] that will see the new economy allocate resources and will make growth take place quite differently than we’ve seen in the last 20 years.”
If any one company in Baltimore typifies the local potential of the high-tech media industry, it is Gr8. Headed by Craig Ziegler, an exuberant businessman whose excitement about the prospects of his industry in Baltimore borders on mania, Gr8 has grown from about 20 employees to close to 100 since its move to the Can Company building last year. He expects to need another 300 or more staffers in the next few years to meet the demand for his services, which include Web-page design, Internet advertising, and other creative computer consulting.

Ziegler is concerned that Baltimore is selling itself short, failing to maximize its potential. “As a combined unit, Baltimore and Washington is the fourth largest in regards to size in the advertising and new-media arena,” he says. “That’s huge. Do we capitalize on it? Not at all. Baltimore needs to start informing people that this market exists here. Go to any one of the outside areas in New York or L.A. or San Francisco, and people say, ‘Baltimore? What’s Baltimore doing in high-tech? They are institutional. They are the biotechs. But they are not creative media.’ We are not on anybody’s radar screen. This community has to come together to rewrite the moniker that we’ve all been stuck with: ‘What the hell’s in Baltimore?'”

The answer to that question may be: not much now, but more and more, sooner and sooner. William Struever — whose firm, Struever Bros. Eccles & Rouse, increasingly specializes in adapting older buildings for high-tech uses — has perhaps the best sense of what’s here and what’s coming in terms of new media. He says he first noticed the new-media and computer- and info-tech trend in cities a few years ago as he traveled to different urban areas around the country.

“Computer-tech, info-tech is much faster growing than biotech,” Struever says, “and I think on a long-term basis it is much more likely to deliver the wealth and jobs and business development that we are looking for. . . .

“It’s all about having the right idea and making the right alliances and having the right funding to be able to go fast and take advantage of an opportunity,” he continues. “Baltimore’s going to be a central place for Web-page design and e-commerce and a whole bunch of tech stuff, not just with Gr8 but these other businesses.” He cites Sylvan Learning, Caliber, Eisner & Associates, e.magination — new or established businesses in Baltimore that are entering the Internet and electronic-commerce markets.

Ziegler says new-media companies bring with them a certain breed of entrepreneurs and employees who can transform city neighborhoods. “We have the ability to attract not blue-collar, but fairly well-educated white-collar young professionals that are city dwellers,” he says. “You look at the numbers that have been declining in regards to people moving outside the city into the suburbs — it is staggering. And you look at the neighborhoods that are starting to become rundown. And then you look at what happened in Canton. This was a very undesirable area for quite a while. [The Can Company] and some of the other projects up and down the strip here have revitalized this entire area in a very short period of time. I mean, that’s staggering. And there’s a lot of technology focus down here.”

Another boost new media can bring to the city is exposure, Ziegler says. “I can’t tell you how many CEOs and presidents from major companies have come through my office space, which means they come through Baltimore. They’ve never been to Baltimore. ‘What a lovely city,’ they say. I mean, I hear some comments I’m sure the mayor would just love to suck up. You can’t pay for that kind of exposure.”

Ziegler plans to grow Gr8 through acquisitions and other expansion, but he is also starting new ventures such as Guest Tech, which is obtaining contracts with hotel companies to install computer hook-ups in hotel rooms.

“According to the analysts,” he says with heated excitement, “we will be the number-five player in terms of size, worldwide, in the new-media space once we get through this next move. Number five. And we’re in Baltimore. If that’s not newsworthy I don’t know what the hell is. Have I talked to the mayor’s office yet? No. Have I ever gotten any tax incentives? No. Did I get any help? Not that I’m aware of. What we have is a major ability to attract world-class customers and world-class talent. And with the help of the city, I think we can build it — we are going to build it with or without them, by the way, but having their help would sure be nice — because the market is just so fertile.”
What Ziegler and Struever are up to dovetails perfectly with Al Gore’s and Parris Glendening’s agenda: combating sprawl by revitalizing cities through high technology. And it is in keeping with Kotkin’s philosophy of achieving economic outcomes through market decisions rather than government programs. But as the authority that still has ultimate say over how land can be used, government can and will have a significant role.

Ron Young, the deputy director of the state Office of Planning and a former mayor of Frederick, was appointed by the governor to chair the Smart Growth and Neighborhood Conservation Coordinating Subcommittee, which grew out of the Smart Growth legislation passed by the General Assembly in 1997. High-tech “certainly is an expanding area of the economy in Maryland,” Young says, and Smart Growth “is about bringing all of that into established areas. The market forces are there. But we need to have the right public policies to turn the incentives back into these established areas, just as we incentivized moving out [to the suburbs] with poor public policies for years.”

For generations now, as Glendening said when he rolled out his Smart Growth proposal in 1996, “sprawl has been supported by an avalanche of federal, state, and county policies.” School-funding formulas, road-focused transportation spending, and other policies sped the spread to the suburbs. Gore, speaking last fall before the Brookings Institution, a think-tank in Washington, D.C., cited “federal subsidies [that] actually gave handsome financial rewards to communities to extend sewage lines far out into undeveloped areas . . . [and] gave employers big subsidies to offer parking spaces to their employees, but much less help if they wanted to help cover their employees’ mass-transit costs.”

As a key implementer of Maryland’s program to reverse these kinds of sprawl-inducing incentives, it’s part of Young’s job to be bullish on Baltimore’s high-tech potential. But he can cite the specific conditions behind the optimism. For start-up companies, he says, “there is a realization that there’s an availability of reasonable space, reasonable price, and a good standard of living there, and quite often these companies are young people who have discovered cities.” Approximately 60 percent of Maryland adults, he adds, are “empty nesters,” people with no children or none living with them. “So when you look at what the city has to offer, everything is there if a few issues are addressed to bring people back in. The state needs to show people those opportunities, and give them incentives to do it. So, yes, I could very easily see a major boom in Baltimore.”

The Smart Growth program is essentially an attempt to use government funds and policies to change investment behavior and direct development to cities and older suburbs. It has three main components. First, it establishes seven “Priority Funding Areas” — already developed areas (including Baltimore City and the suburbs inside the Baltimore Beltway) — outside of which state investment in growth-related projects is, to quote the statute, “generally prohibited.” Thus, Baltimore will get preferential treatment in state funding for roads, sewers, housing, and other investments in economic growth. Second, the “Rural Legacy” program is designed to fund state acquisition of farms, forests, or natural-resource lands to protect them from future development — sending the market elsewhere for future investment. Finally, there is the “Brownfields” program, which uses incentives to encourage cleanup and reuse of abandoned industrial lands that may be contaminated, many of which are found in the city.

Barriers to the program’s success remain, including circumstances not foreseen when the state legislature debated it last year. The drought has exacerbated financial problems already plaguing Maryland farmers, prompting some to sell off their land, most likely to developers who want to put up homes, malls, or office parks.

Another recent and unforeseen wrinkle for Smart Growth was a transportation-planning fiasco uncovered by The Sun. Tens of millions of dollars of federal funds for building new roads in Maryland may be held up because the political leaders in the Baltimore region failed to accurately report the amount of emissions from cars. There is a “silver lining” in this snafu, Young says: Developers might decide that unfunded road projects nix their plans for rural areas and choose to look at established areas that don’t need new transportation infrastructure.

There is also general uncertainty about the economy. The current boom has been going on for about seven years now, fueled in recent years by what Federal Reserve chairman Alan Greenspan calls “irrational exuberance” in the marketplace, particularly over Internet companies. The Federal Reserve has been bumping interest rates slowly upward to try to cool down the hot times, but at some point, many predict, an economic downturn will hit. This would slow down not only sprawl, but new investment in Baltimore’s nascent high-tech sector.

“I sweat bullets,” Struever says. “We are all dependent on interest rates and the overall momentum in the economy. Things could go wrong, short term or long term. I think very much the ball game is establishing that the opportunity is here today, and to get us as far along as we possibly can while things are good and interests rates are low.”

Struever’s worries are echoed by M.J. “Jay” Brodie, the head of the Baltimore Development Corp., the city’s quasipublic economic-development arm. “Those of us who have lived through recessions . . . tend to believe that this wonderful economy will not go on forever, not at the present rate. It doesn’t mean there will be a depression, but interest rates will probably creep up a bit, investment may cut back a bit. So while interest rates are low, we want to keep pushing for economic-development investment in Baltimore.”

Finally, licking sprawl in the suburbs and powering a high-tech magnet in the city depends in large part on the success or failure of regional approaches to economic development. The Greater Baltimore Committee (GBC) zealously advocates cooperation across city and county lines, and the idea that a strong urban core is key to the health of the region. But Baltimore’s weaker economic condition makes it difficult for city leaders to establish a strong presence at the regional table.

Donald Hutchinson, the former Baltimore County executive who heads GBC, says that despite its weakened condition, the city is still very much the heart and soul of the region. The city, he says, has to use this psychological advantage to extract agreements from its surrounding counties to share prospects for growth.

“You have to understand that 70 percent of all new growth comes from already existing businesses,” he says. “Only 30 percent is start-ups or pulling some other company from outside into the region. So if 70 percent of the movement is internal within the city and the five surrounding counties, they gotta compete for what’s already here, and that’s where the city gets hurt. And that’s why the city has to establish understandings and relationships.

“If I’m the new mayor,” Hutchinson continues, “the first thing I do is say [to the surrounding counties], ‘It is to your advantage for the city core to be strong. If a corporation is looking to move from the city to the county, you’ve got to give me the courtesy of having the first run. Don’t try to take them from me. Don’t try to compete with me for that business. Now, if they decide that they are going to leave and I’m absolutely convinced that they are going to leave, I, the mayor, will do whatever I need to do to make sure they stay in the region, and I’ll work with you to help create the environment to make sure they stay in the region.’ That’s the leadership that you are going to need. Otherwise, the city will fail if it puts itself into a competitive posture with the counties.”

Ultimately, though, the city’s position as a regional player is only as strong as its economic competitiveness, and the high-tech sector may well be key to securing that strength. The first step to attracting high-tech is recognizing its potential and taking steps to capitalize. That’s where Penny Lewandowski, the head of GBC’s newly formed Greater Baltimore Technology Council, comes in.

“Nobody has a clue that this community is growing and thriving right here in the city,” Lewandowski says. “The feeling is that the city is ignoring the tech community and the tech community really could be a very important part of the city’s economy. We have to find these companies, build a community, figure out how we are going to promote this, push their success stories. But then there’s got to be quid pro quo on the other side. There has to be good office space. Bill Struever is doing his part, but what else is going to happen in the city that makes this happen?”

Gr8’s Craig Ziegler thinks he has the answer. “Baltimore has the ability to become a major player in this market,” he says. “We have to help the local government understand the opportunities of what this emerging market could do, what it means to the economy. And it’s huge. Across the board it is a major topic.

“You got to capitalize on it now, because who knows where it’s going to be a year from now. We got to work on Internet time.”

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