Legacy Costs Threaten Cities and Towns in U.S. Manufacturing Regions

Rust Belt MapHere at Arch Street we dislike the term “Rust Belt”.

But alas, old terms die hard, just as do preconceptions of what is happening in this region spanning the Northeast and Midwest. Having been engaged in tech-based economic development in the Northeast for over 30 years, we know that this term does not adequately describe the changes occurring in places like Utica, New York or Erie, Pennsylvania.  Regardless, small cities and towns especially are under severe threat due to high legacy costs (pensions, infrastructure) and dwindling population and tax bases.  A recent study by the Manhattan Institute is stark in its assessment:

Rust Belt cities’ legacy cost burden will continue to weigh on them just as much as will their legacy of industrial decline.  Costs associated with both bonded debt and retirement-benefit liabilities will reduce scarce funds available for existing services and future improvements. It is doubtful that Rust Belt cities can grow their way out of their struggle with legacy costs.  High debt and retirement-benefit liabilities, as well as shrinking tax bases, spring from and perpetuate a lack of private investment. For these reasons, state governments will have a vital support role to play in ensuring the ability of Rust Belt cities to continue providing basic municipal services.

While growing out of the this cycle may be extremely difficult or impossible without government intervention,  at Arch Street we believe that a promising economic development strategy is to grow one’s own through fostering policies and programs that support entrepreneurs and tech startups.  That is why we are excited to work with IgniteU-NY powered by NYSTEC — a tech innovation program in New York helping promote new and exciting partnerships among industry, academia and government laboratories.

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