Interview with David McDonald – Developer, Businessman, Entrepreneur and Author

David McDonald is a successful developer, businessman, entrepreneur and author. His book titled Saving America’s Cities, and Saving America’s Cities, 2nd Edition tackles one of our nation’s greatest challenges – regaining economic prosperity and social vibrancy in America’s urban settings. In his book and lectures, David provides an objective assessment of the root causes for the decay of metropolitan centers, and offers practical implementation steps to reverse that decline.

David’s professional experience makes him a highly credible expert. He is the founder two retail chains and co-founder of two others. David was the Director of Development for a large real estate investment trust, and directed the strategic growth initiatives of 13 retail chains – including large department stores that were, at one time, located within the core of many cities. He has experience in commercial lending & appraising, and in management and leasing of high-rise office buildings, apartments and shopping centers and malls. David believes in what he teaches, and works to put his principles into action by serving as Co-Chairman of the Mayor’s Leadership Council in Dayton, Ohio. He formed a group called the Dayton Region Developers Committee that has met to discuss development opportunities within the City of Dayton, and he is working on other initiatives, yet to be announced.

I had a lot of fun interviewing David. I learned a lot from the exchange. He challenged my thinking and he boosted my confidence in the future of America’s cities if we, as a nation, can get committed to simply doing the right things right.

1. Question: I personally believe and espouse that economic development should be led by the private sector and supported by the public sector. My main reason is that political time horizons are too short-term in nature and substantive, sustainable change takes time. In contrast, CEOs are focused on building enterprises to last and best suited to help build communities to last. What is your reaction to that hypothesis? Is it consistent with your viewpoint?

   It is absolutely consistent with my viewpoint! Sophisticated developers have been responsible for taking our retail, restaurants, entertainment and businesses out of the core of our cities for six decades. If you want to start the process of bringing all of these businesses back, you have to enlist the help of the same types of sophisticated developers. Putting the life back into our stagnant and decaying cities is all about development, and redevelopment. Elected officials are not trained as sophisticated developers. I should also add here that being in an economic development department within city government for years does not qualify an individual as a “sophisticated developer”. In stagnant and decaying cities, “small steps” will not get the job done. You must take big steps and make bold moves. Elected officials usually are not willing to make big, bold moves. Doing so could cost them an election. The private sector along with sophisticated developers can push through the kind of initiatives needed to save our cities. This is also good for elected officials because if good things happen on their watch, they can take partial credit, and that might help them win their next election. In six decades, there has not been a single stagnant or decaying city globally or significantly saved by elected officials, think tank consultants, economic development groups or concerned citizen groups. However, in a handful of cases where the private sector joined with sophisticated developers (and with the support of elected officials) the right things were done. In every single one of those cases, significant progress was made toward saving the cities in question.

2. Question: Since the Strengthening Brand America Program is all about place branding, I am obviously biased. What role do you see marketing playing in the successful revitalization of America’s cities? Do you feel many economic development organizations have sufficient mastery of marketing to do the job right?

   Allow me to answer the last part of this question first. Virtually NO economic development organizations ANYWHERE has sufficient mastery of marketing to do an effective job. As odd as it might sound, I don’t even think most of them truly know enough about their city and their region to know what they ought to be selling – let alone how to sell it. Marketing should play a very important role in helping with the revitalization role – ONCE A CITY ACTUALLY DOES SOMETHING WORTH TALKING ABOUT! Since not a single stagnant or decaying city has been globally or significantly saved in the last six decades (several are very, very close) you have to wonder what cities could market that would actually be worth telling the world about. It certainly would not be bike paths, parks, monuments, pedestrian malls, etc. All of those things are nice for a city to have, but they will never, ever save a stagnant or decaying city. Now, once a city actually gets on the right track, then letting the world know that you are finally doing the right things is very, very important. Marketing your TRUE successes to your region, your state and to the federal government could actually get you additional economic development dollars, and more businesses and residents locating in your area.Lastly, I would say that this idea of “brand America” by itself, has become a dog & pony show and a diversion from needed initiatives. It has become that because the term has become trendy, and so many cities have picked up the concept and have done a half-hearted job of implementation. Therefore, what you find most of the time with this initiative is people who are trying to show others that they are doing SOMETHING, and so they come up with one more catchy phrase. To me, catchy phrases are a “red flag”. They tell me that the people behind them can’t come up with anything worthwhile to accomplish, so they go after a little “low hanging fruit”, i.e., the catchy phrase, to show others that they are earning their keep. In reality, they are doing anything but earning their keep. IF you have a city that has something to brag about, then branding can become a very valuable tool.

3. Question: Do you see conflicts in the way various regional economic development groups work together? Is there alignment or misalignment at the different levels (i.e. city, state, federal)? If yes, how does it manifest to sabotage everybody’s best intentions?I see very few cases where these groups work well together. I also see very few cases where these groups are truly effective. It is true that just about all of them get things done, but at relatively low levels of efficiency. Many of these groups are nothing more than subcontractors for federal, state and local governments. They don’t actually create “economic development” to any great degree. True economic development is created by the private sector and/or by trained and proven developers. How many economic development groups are you aware of that are run by the private sector and managed by sophisticated developers? The answer is “almost none.” There is really no alignment or misalignment. They just don’t work together. Most times they compete with each other for “bragging rights.” In almost every region, there are too many of these groups and they should all be merged into one or two large organizations. This would free up hundreds of thousands of dollars to hire true experts to run the consolidated groups and to hire marketing professionals who would suddenly have ample funds to market their regions to the state and the entire US. Well then, why doesn’t someone make this happen? Every one of the inefficient economic development groups has their own Board of Directors. Every Board thinks their group is doing great – it is all the others that are dysfunctional. Trying to get them all combined would be about as hard as regionalizing a city with its county. This is really a shame because merging the economic development groups in a region has the potential of greatly enhancing a regions good health – and in a hurry!
4. Question: I gave a lecture at a small community seminar about branding and I used Branson, Missouri as a case study of effective place branding. My “ah ha” disclosure to the audience was it took 100 years of dedicated development to guide Branson to its current prominence. First, do you agree that Branson is a positive example of getting it right? Second, what other cities do you think are positive examples of what’s possible?I am glad you picked Branson. Branson is a very bad example. First, with around 7,000 residents, it is not really a city – although there are many municipalities of this size that need help too. Next it is a tourist area with lakes and rivers everywhere. In the end, this is what made Branson successful. Also, it’s the “law of small numbers”. If I have 10 people in my community and I go to 20 in a year, then I have doubled my population. So what? Branson grew by roughly 17% over the last decade and its county grew by approximately 22%. However, that was a gain for the city of only 1,000 people, and 8,000 for the county. Yes, I am sure that marketing was instrumental here as was branding. This is a resort area, and therefore it lends itself to good marketing and branding. I am also sure that smart people – including sophisticated development type individuals – were instrumental in making Branson what it is. It’s just that this is the exception rather than the rule. Of the largest 300 cities in the US, approximately 61% are stagnant or decaying and around 39% are successful. In every single one of the successful cities, you can track their success to significant amenities. For example, most capital city towns are successful because they have so many government employees and those payrolls tend to make all capital city towns healthy. Cities that are on oceans are generally healthy, or that have a large military base, or they are ski resorts – SOMETHING, other than people has given them the ability to become successful. People will want to take credit for the successful cities, but it is important to understand what truly makes some cities successful so that you do not go off on wild goose chases, trying to copy various aspects of successful cities in the hopes that if you can implement some of their initiatives, you too will bring success to your stagnant city. It doesn’t work that way.Who has done it right? The best two examples are Pittsburgh, PA and Cincinnati, OH. Honorable mention goes to Indianapolis, IN, Los Angeles and New York City. Pittsburgh should be a ghost town. They lost their steel industry. Pittsburgh was synonymous with steel. Yet, Pittsburgh is close to thriving. Why? They had a lot of people to work with – about 2.4 million. They are on two rivers. They have a “captive” trade area. However, in 1st, 2nd and 3rd place is the fact that Pittsburgh has four sophisticated development companies that call Pittsburgh home. Those four (and one outsider, Simon Property Group) have almost totally redeveloped Pittsburgh to include building about 1.3 million square feet of restaurants, retail and entertainment on their river in the core of the city. These developers had the political clout (The private sector.) and the sophistication on the development end to turn Pittsburgh! Cincinnati was slowly decaying a decade ago. Then the private sector formed 3CDC (Cincinnati Center City Development Corporation). They created an economic development group – which they controlled. They put a man who was a sophisticated developer in charge, and in the past seven years they have turned the city around! In Indianapolis you have the headquarters for the largest mall developer in the world – Simon Property Group. They are headquartered downtown. They have great political clout in their region and great development experience. This allowed them to work with elected officials to reclaim roughly four city blocks downtown and build a true suburban mall in the center of their city. It is successful to this day!
5. Question: I like the analogy you use to explain regionalization. Comparing it to a business merger makes a lot of practical sense. In pursuing foreign direct investment, the cost of creating awareness among capital investors keeps going up and up. I am beginning to believe the only way to afford competing is by cost sharing through regionalization. What do you see are the benefits and liabilities of a regional approach to economic development?For the population as a whole, there are absolutely no liabilities and there are many, many advantages. However, if you are a union employee who loses their “back room” job in a merger, or if you are an elected official who must give up their power and their pay check, then it is a different story. Regionalization is absolutely the same thing as mergers and acquisitions in the private sector. One of the prime reasons companies merge is to get rid of the duplication in “back office” functions, like accounting, payroll, legal, human resources, etc. I was once with a company that merged. 700 employees had to find other jobs. For them, it was not pleasant. However, one year later the purchasing company put $12 million dollars to their pre-tax bottom line because they merged back office functions and freed up $12 million for expansion. Your cities are the equivalent of these companies; because big cities ARE big business and they need to be run like big business. Therefore, the main reason to regionalize is to cut expenses, and you CAN cut them drastically and maintain services, although special interest groups will try to say this isn’t so. Given the fact that cities are as financially strapped as they have ever been, and given the fact that it will get worse over the next few years, cities had better get in gear and start merging services and political entities NOW. Of course, in addition to saving money, you also streamline the decision making process by reducing the number of government entities that have a say in all sorts of decisions. Millions upon millions of dollars that could be used for a regions economic development and marketing are eaten up by bloated, outdated bureaucracies. I have researched the 22 cities that, to date, have regionalized. Half are more successful than their state’s average, and half are less successful. Regionalization is not a silver bullet! It is PART of the answer. It is not THE answer to saving your cities. Additionally, it takes roughly 12 years to implement – that is if you have a “strong mayor” form of government and a strong mayor. Does your city have that long to wait?
6. Question: You talk about the fact that there are only four initiatives that can save a city. Why don’t more cities focus on doing the things that really matter in the long run? Are there any cities you feel are doing it right and can be viewed as success models?Virtually all cities are run by what you would fairly have to call concerned citizen groups, fiefdoms and large egos. They typically don’t want ANYONE suggesting a new way of doing ANYTHING – even if the walls are crumbling around them. The four initiatives that can save a city are so very simplistic. Trouble is that almost no one takes them on because they require money and development expertise. The groups running most cities have neither. The four initiatives that can save a city: 1. Keep the businesses you already have 2. Keep the residents you already have 3. Bring in new businesses 4. Bring in new residents. Since these four initiatives are so simple to understand, but so difficult to implement, the groups in charge of most cities go after “low hanging fruit”, such as bike paths, parks, monuments, arts festivals, paint everything, put in planters, etc. You can have any kind of government structure in a successful city because nothing much matters – since you are already successful for reasons other than elected officials. In a stagnant or decaying city, you need at a bare minimum: 1. A strong mayor form of government 2. A strong mayor 3. Senior regional CEO’s to take a “hands on” interest and 4. A WORKABLE VISION!!! This last requirement is why I wrote Saving America’s Cities.As stated earlier, the best examples are Pittsburgh, Cincinnati, and Indianapolis. Other noteworthy examples are Los Angeles, New York City and Memphis. Remember, you can’t just look at the successful cities for answers because virtually all of them are successful for reasons other than what people did. You must look at the few decaying cities that people have actually helped.
7. Question: What was the motivation behind writing your book – Saving America’s Cities? What has been the reaction to the book from private sector and public sector leaders? Are you seeing signs of hope that cities are on a path for improvement?For about 34 years of the 39 years I have been in business, I have observed literally hundreds (approaching 1,000) of cities react to the loss of their retailers, entertainment, restaurants, businesses and residents. I have seen them make almost exactly the same mistakes time after time because they are not trained to know what to do and they have no workable vision. If you don’t have a truly workable vision, you stand absolutely no chance of success. I saw the same mistakes being made in my home town, and it was very frustrating for me, so I wrote a book about what actually went wrong with many of our cities and what could and should actually be done to improve their condition. Since I have 9,600 pages of demographics in my office that I have used for about 29 years, it was easy to back up my conclusions with facts – and in some cases, examples of who has actually done the right things.The reaction has been outstanding from the private sector and about half the public sector. I have lectured roughly 40 times in the past 16 months, and not a single group has let me complete my lecture on time. In every case, I have been held over between 15 minutes and two hours.Other than for a handful of cities, I see very little evidence that anything new and dramatic is in the works that could actually turn our stagnant and decaying cities around. The 2nd Edition of Saving America’s Cities came out yesterday. It is available through my web site, the Amazon Bookstore and through the AuthorHouse Bookstore. I didn’t write the book to make money. I did it to try and help our cities. If, and it is a big “if”, the private sector leaders of our cities will read the book and follow its roadmap, and the examples set by Cincinnati, Pittsburgh, Los Angeles, Indianapolis and a few others, they WILL start the process of turning their cities around.