The Small Cities Study Tour: Cedar Rapids' Economic Recovery

  • Community Development Finance
  • Local Economic Development

How can a small city buffeted by natural disaster retain and grow its business community and population, and enjoy economic recovery? In early March, the small cities study tour visited the city of Cedar Rapids, Iowa, to study its economic development success and challenges in the wake of a disastrous 2008 flood. The tour is a partnership of place-based funders and Federal Reserve Bank researchers who visit cities that have bounced back from economic decline to learn about their "arcs of revitalization."1 The aim is to produce useful lessons and insights that can benefit other small cities and place-based funders. Highlights from the tour's first stop in Chattanooga are available in a companion article.

Following the flood, the future of Cedar Rapids looked uncertain. The flood struck during the Great Recession, wiped out some 1,200 homes and a large number of businesses, and had the city teetering on the brink of a depression. This March, however, the metro area's unemployment rate was 4.4 percent, six-tenths of a percentage point below the national average. Although aided by federal dollars in the short term, longer-term post-flood economic success was hardly assured, and relied on a combination of strong community organizations and city leadership, smart economic development strategies, and deep engagement with and by the local business community. Despite some challenges on the horizon, Cedar Rapids' post-flood economic recovery offers interesting insights to other small cities (see chart 1).

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Cedar Rapids is a city of some 128,000 residents in the eastern part of Iowa. The city is situated in the Corn Belt, in the center of the country, on a major river, the Cedar. It had early access to rail and later the interstate highway system and the Eastern Iowa Airport. These factors ensured the city became a hub for agricultural processing and manufacturing, such as meat packing and cereal production as well as truck transportation and logistics. The former industry is still a very important part of the local economy and includes several of the city's largest employers, such as Quaker Oats, General Mills, and Archer Daniels Midland.2 Cedar Rapids is not the most diverse of cities, but minority communities have seen growth in the past several years. In 2014, 8.3 percent of the city's population was African-American (up from 6.7 percent in 2010), and 3.5 percent was Hispanic (3.1 percent in 2010).3 Lacking much in the way of natural assets (the river's rapid current, for instance, does not allow for water recreation opportunities within city limits), Cedar Rapids has had to focus on exploiting its economic assets and developing its human capital.

The business and civic communities
Cedar Rapids exudes a culture of community. The city boasts strong civic organizations, such as the East Central Iowa United Way, the Greater Cedar Rapids Community Foundation, Four Oaks (a nonprofit dedicated to child welfare and behavioral health), Matthew 25 (a nonprofit dedicated to revitalizing neighborhoods on the west side of the city), and other organizations that have been actively involved with rebuilding and improving the community after the 2008 flood. The Block by Block program, a $1.9 million joint effort between Matthew 25, Four Oaks, and homeowners and volunteers, is one example of community engagement aimed at reinvigorating neighborhoods. Housing revitalization efforts in the challenging Wellington Heights neighborhood by Four Oaks is another. By purchasing and restoring crime-ridden or code-violating "problem properties" and by offering a Home Incubator Program, the organization is gradually improving the neighborhood's livability. Finally, the local United Way, which reportedly receives double the funding of similarly sized communities, is another example of the strength of local community organizations.

The engagement of local employers in these and other community improvement efforts has been instrumental. For instance, Block by Block was supported by a $1 million gift from the chief executive of CRST, one of the largest employers in the Cedar Rapids metro area. Several other large local employers, such as Quaker Oats, made an explicit commitment to the city and its downtown area after the flood. CRST invested in a downtown development project, the CRST Towers. Rockwell Collins, the city's largest employer, moved 400 jobs downtown. The commitment of these large local firms to the city's central core has been instrumental to its revitalization, and a strong connection between the city and local employers, both large and small, has been important to the overall well-being of the local community.

Economic development efforts
In Cedar Rapids the engagement of private sector leadership in economic development efforts has been substantial. For instance, some 100 local business leaders of small and large firms initially gathered together in Priority I, an organization dedicated to economic development, to promote new business recruitment to the city. This role has since been taken over by the Cedar Rapids Economic Alliance, which maintains close ties to city leadership. The alliance was formed as a merger between Priority I, the Cedar Rapids Area Chamber of Commerce, and the Downtown Development authority, which allowed for a unified focus on economic development and reduced duplication of efforts. Today the organization boasts some 500 business stakeholders and receives 90 percent of its funding from private sources.

The city has established one centralized economic development department, and has instituted a case manager model for its permit process. Developers are immediately put in contact with the team that decides on their project, and most decisions are made within a 90-day time frame. This move fits with Cedar Rapids' overall business-friendly attitude. This is exemplified by annual visits by city officials and local business leaders to the national headquarters of local employers to understand their needs and express appreciation for their contribution to the community. This focus on business needs is also employed at Kirkwood, a local community college that serves the region and has close ties to the business community. The college recently conducted an in-depth study of the area's workforce needs, which resulted in employer-led work groups focused on industry clusters important to the area's economy.

More recently, the city's development focus has shifted from employer recruitment ("buffalo hunting") toward regionalism and local talent and entrepreneurial development. City and business leaders recognize that Cedar Rapids needs to be connected to Iowa City, some 20 miles south, and the University of Iowa based there. This regional focus—Iowa's Creative Corridor—hopes to emulate the successes of Austin and North Carolina's Research Triangle and aims to attract and connect graduates from the University of Iowa with employers in Cedar Rapids. Additionally, Kirkwood is considered crucial for supplying the city with a pipeline of tradespeople and skilled workers.

Challenges and opportunities
An immediate problem facing Cedar Rapids and the broader region is a need for high-skilled workers. The city's low unemployment rate is leaving employers with worker shortages, particularly for high-skilled manufacturing jobs, but Cedar Rapids is experiencing difficulty attracting and retaining young, high-skilled workers. At present, the city is not succeeding in fully connecting the demands of the local labor market with the supply of talented individuals graduating from the University of Iowa or Kirkwood, and it's not been able to lure students to settle in the community. Additionally, the city's leadership is expecting a shortage of skilled tradespeople like electricians. While some local efforts and programs such as apprenticeship initiatives have started to address this challenge, they have been insufficient. The city's traditional pipeline of Iowans that move from small rural communities to the state's larger cities (such as Cedar Rapids) appears to be drying up, exacerbating this issue.

The city aims to attract more young high-skilled workers by boosting its quality of life. To this end, Cedar Rapids has invested heavily in arts and entertainment development projects over the last several years. For instance, $45 million has been invested in the construction of a new library, and $2 million was spent building a park that connects the library to an art museum. Some of these projects (such as the NewBo city market) appear successful at enthusing younger individuals. However, the dearth of downtown retail and housing options—downtown Cedar Rapids currently boasts just 900 housing units—is undermining city efforts to attract and retain high-skilled millennials.

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Another issue that threatens to undermine Cedar Rapids' success story is the plight of its minority population, which is disproportionally affected by poverty and unemployment. For instance, the poverty rate for the city's African-American community (40.4 percent) was over four times as great as that of whites (9.7 percent) in 2014.4 Additionally, as depicted in chart 2, graduation rates among African-American and Hispanic children consistently trail those of whites in Cedar Rapids' school district, and at Kirkwood. In 2015, 74.7 of African American and 75 percent of Hispanic seniors graduated from Cedar Rapids high schools, compared to 85.2 percent of white seniors.5 The city now offers these communities a seat at the table, and is working on rallying local business leadership to address these problems. However, much progress needs to be made to ensure these groups don't falter and are not shut out of the area's economic successes altogether.

Better integration of the growing minority community, improved educational outcomes among minority students, and a better connection between labor demand and training, with a particular focus on minority participants, might prove part of the solution for the city's growing workforce and minority challenges. Finally, more affordable housing options and a livelier downtown scene, including more retail and restaurant establishments, could go a long way toward boosting recruitment and retention of high-skilled and talented young workers.

While Cedar Rapids has enjoyed some distinct advantages, its story may nevertheless resonate with cities that experience acute economic decline following an isolated event like a natural disaster. For more information on natural disaster recovery in small cities, please examine the work of Community and Economic Development adviser Ann Carpenter: Resilience in Planning: A Review of Comprehensive Plans in Mississippi after Hurricane Katrina and Social Ties, Space, and Resilience: Literature Review of Community Resilience to Disasters and Constituent Social and Built Environment Factors. The Atlanta Fed's Small City Economic Dynamism Index provides data on a variety of trends in other smaller cities. Further information and research on Cedar Rapids can be found at Industrial Cities Initiative, edited by Susan Longworth, Federal Reserve Bank of Chicago, 2014, and Cedar Rapids Metro Economic Alliance, Economic Development Studies and Reports.

By Mels de Zeeuw, research analyst in the Community and Economic development group

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1 The team includes representatives from the Funders Network for Smart Growth and Livable Communities, several foundations located throughout the country, and the Federal Reserve Banks of Atlanta, Boston, Chicago, and New York.

2 Longworth, Susan, Industrial Cities Initiative, Federal Reserve Bank of Chicago, 2014.

3 American Community Survey 5-year estimates, 2010–14.

4 Ibid.

5 Iowa Department of Education, "Education Statistics: Iowa Public High School, Class of 2015, 4-Year Graduation Data by District and Subgroup."