Development or Colonization? Chicago power-brokers take control of community redevelopment in Gary, Indiana

Photo of Gary, Indiana with the US Steel’s Gary Works in the background. From Wikimedia Commons, the free media repository

In 2016, the city of Gary, Indiana was faced with an almost apocalyptic set of challenges. More than half of the city’s children were living in poverty, 1 in 4 properties was vacant or abandoned, 2 in 5 buildings were in disrepair, and 1 in 5 properties are on tax sale every single year. City officials estimated the cost of demolishing all of the abandoned and blighted buildings at over $100 million.

In a desperate attempt to turn their struggling city around, Gary officials entered into an unprecedented partnership that would essentially privatize the redevelopment functions of the city. On July 29th, 2016, the City of Gary Redevelopment Commission approved a massive public-private partnership agreement with MaiaCo, a newly formed for-profit corporation backed by wealthy Chicago insiders from the inner circle of former Chicago Mayor Richard Daley. Under the terms of the agreement, MaiaCo would put up the capital to allow the Redevelopment Commission to take control of tax delinquent properties. In exchange, MaiaCo would be guaranteed 65% of the proceeds from the sale of those city-owned properties to developers.

The deal provided the City of Gary with important capital to begin the process of economic redevelopment, but it also handed over key decisions about the future of the city to a small group of investors from Chicago.

Background

In 1906, about 25 miles southeast of Chicago, on the shores of Lake Michigan, US Steel broke ground on what would become the world’s largest steel mill. The company named the mill and the tidily planned town that it built alongside the works after its chairman Elbert Henry Gary. By 1970, the city would grow to over 175,000[1] with over 30,000 people employed at US Steel’s Gary Works.

From its earliest days, Gary was an important and contentious space in the country’s long, difficult and winding struggle for racial justice. Throughout the Great Migration, white industrialists from the north actively recruited Black sharecroppers from the Jim Crow south as a source of cheap labor in mills and factories. For their part, the Brotherhood of Sleeping Car Porters smuggled copies of the Chicago Defender, one of the nation’s oldest Black newspapers into the south with advertisements for jobs further north.

As Gary’s Black population grew, so too did racial tensions. While Blacks were welcomed into Gary as a source of labor, they were hardly welcomed as neighbors. In 1911 the Gary Evening Post reported that white community leaders were sponsoring a “clean out the Negro” campaign determined to rid the city of its “bad Negroes.” The newspaper warned that “any Negro in Gary who hasn’t got a job had better lose no time in getting one.” Two days later the Post reported that Gary Police “Chief Martin is determined that the city shall be cleared of the worthless Negro who refuses to work and has issued strict orders that every member of this race be driven out of the city.”[2] By 1945 hundreds of white students at Gary’s Froebel School took part in a two-week “hate strike” to protest against racial integration.[3]

While Gary’s history of anti-Black racism played a key role in its history, the city also played an important role in the struggle for civil rights. In May of 1967, Richard Gordon Hatcher, a 34-year-old Black activist defeated the white incumbent Mayor Martin Katz in the city’s Democratic Party primary election. The city’s white establishment Democratic Party refused to back Hatcher, mobilizing instead in support of his Republican opponent, Joseph Radigan, in the general election. But the momentum of the ongoing civil rights struggle and the demographic shift of the city overpowered the white establishment and on November 7, 1967, Hatcher made history, being elected the first Black mayor of a major US city.[4] Just a few years later, Hatcher hosted the landmark 1972 Black Political Convention in Gary.

CROWDS GATHER ON primary election night on May 2, 1967 where Richard G. Hatcher defeated incumbent Mayor Martin N. Katz. Calumet Regional Archives, Indiana University Northwest.

Deindustrialization, Decline and White Flight

But just as Gary’s new Black political leadership took the helm of the city government, a wave of deindustrialization and automation swept across the country’s industrial belt. While Pittsburgh, Cleveland, Detroit and Buffalo were all hit hard by waves of plant shutdowns, US Steel’s Gary Works remained a strong anchor in the city. Today the Gary Works is the largest integrated steel mill in North America with an annual capacity of 7.5 million metric tons.

But while the mill is still the largest employer in the city, automation and technological improvements allow the company to operate with just 5,000 employees, a fraction of 30,000 workers employed in 1968, when Richard Gordon Hatcher took office. Further, the construction of the Interstates 90 and 94 highways running east and west and Interstate 65 running to the south has allowed middle class workers from the mill to move out to suburbs where they could raise their families outside of the shadow of the steel mill.

The result has been decades of disinvestment and white flight. By 2017, Gary’s population was 76,000, less than half of what it was in 1968 when Hatcher took office. The residents who were left behind were largely Black. According to census data, in 2017, 81% of the city’s population was Black, and only 14% of the population was white and 5.8% was Hispanic or Latino.

According to a City of Gary Parcel Survey, one in five buildings in Gary is vacant (21%, 6,902 total), nearly two in five buildings in Gary are blighted (37%, 12,394 total) and 42% of land in Gary is vacant with no structure.[5]

To many Black residents, the causes are clear. Walter Bell, a 78-year-old retired steelworker told the Guardian, “Segregation did this to Gary. When the jobs left, the whites could move, and they did. But we blacks didn’t have a choice. They wouldn’t let us into their new neighborhoods with the good jobs, or if they let us in, we sure as hell couldn’t afford it. Then to make it worse, when we looked at the nice houses they left behind, we couldn’t buy them because the banks wouldn’t lend us money.”[6]

Another resident, Marcia Garcia, 74, was more blunt, telling the Guardian, “Racism killed Gary. The whites left Gary, and the blacks couldn’t. Simple as that. Print that because it is true.”

The MaiaCo Partnership — An Unprecedented Privatization of Community Redevelopment

In the face of almost apocalyptic challenges, Gary’s city leaders have been searching for new and innovative strategies for re-development. In a 2016 presentation Joseph van Dyk, Gary’s Director of Planning & Redevelopment laid out what he and other city leaders understood as some of the key barriers to redevelopment.

van Dyk argues that diminishing property tax revenue leading fewer residents to pay higher costs for city services. He reports staggering blight and abandoned building — 1 in 4 properties are vacant or abandoned, 2 in 5 buildings are in disrepair, and 1 in 5 properties are on tax sale every single year. It would cost an estimated $100 million to demolish all of the vacant buildings in Gary.

Of the land that is available for development, van Dyk notes that there is no contiguous land available in the city where investment and redevelopment can take place, reporting that his office hears “regularly from brokers who represent investors who want large lots, but we too often are unable to meet their needs and they choose to invest elsewhere.” Simply clearing title for a single block of abandoned property, he argues, would cost the city $110,000 in professional services.[7]

To navigate these challenges, the City of Gary Redevelopment Commission entered into an unprecedented partnership with the newly formed consortium MaiaCo, LLC that essentially privatizes the city’s redevelopment functions. Under the agreement, MaiaCo will provide the upfront capital to acquire and clear title of tax delinquent properties. The Redevelopment Commission will retain ownership of those properties but if they are sold for development MaiaCo receives 65% of the proceeds and the Redevelopment Commission would receive 35% of the proceeds.[8]

The partnership is focused specifically on three areas of Gary. The Broadway corridor between Interstate 80/94 and Interstate 90, the area south of I-10/94 between Chase and Burr streets, and the Aetna neighborhood.[9]

While city leaders lauded the partnership as an innovative approach to urban problem solving, many critics were quick to raise serious questions about the project. At a community forum just a week two dozen residents turned out to raise objections with quick approval of the deal, arguing that the public should have been involved from the inception of such a consequential deal. Residents also raised questions about who would benefit from the agreement, many worrying that the partnership would be more focused on attracting new affluent residents than improving the lives of people already living in Gary.[10]

Kelli Chavez from the University of Chicago notes that while there are some protections for residents, “there was no citizen input into the [Community Benefits Agreement] included in the Gary-MaiaCo deal, and the city finds it has undermined the trust it was attempting to build with residents. Citizens are therefore right to worry: they have little control over the types of business or developers that come to the city.” While the agreement does stipulate that new developments must be approved by the Redevelopment Commission, residents are left, then, to rely on the same commissioners who left them out of the initial process to protect their interests.[11]

The Political Landscape

Perhaps the most interesting and, for many, concerning, aspect of the Gary-MaiaCo partnership is the constellation of wealthy white Chicago power-brokers who are involved in the deal. MaiaCo was formed in 2016, specifically to facilitate the Gary, Indiana project. The company’s CEO is Michael Reinhold, a former Principle at Tur Partners, the investment firm of former Chicago Mayor Richard Daley. While Daley is not involved in the day-to-day operations of MaiaCo, he is acknowledged as an “unpaid advisor”[12] and Reinhold told the Chicago Tribune that Daley “paid my salary for a year” while he was getting MaiaCo off the ground.

Another partner in the MaiaCo venture is Greg Goldner the Founding Partner and CEO of Resolute, a politically powerful and well-connected Chicago-based consulting firm. While Goldner’s biography on the MaiaCo website does not list his affiliation with Resolute, his biography on the Resolute website boasts that he was “twice named by Chicago magazine as one of the most powerful people in Chicago.” Prior to starting Resolute, Goldner worked for Chicago Mayor Richard M. Daley’s office and managed Rahm Emanuel’s first congressional campaign.[13]

Goldner seems to have also mobilized his partners at Resolute in the MaiaCo project. In the Company’s 2016–17 annual report to the Gary Redevelopment Commission, the company lists Resolute partners Dave Smolensky, Anne-Marie St. Germaine, and Rob Nash among its six shareholders.

The third partner in MaiaCo, B.R. Lane, is the only Gary resident and only African-American on MaiaCo’s leadership team. Before joining MaiaCo, Lane was the Chief of Staff to Gary Mayor Karen Freeman-Wilson and interim director of the Gary International Airport. Lane’s former boss and mentor, Karen Freeman-Wilson has been a strong advocate of the MaiaCo partnership. During an update on the project in July of 2018, the Times of Northwest Indiana reported that she blamed delays in the project on “distractions with people spreading rumors and untruths about the project.”[14]

Powermap of Gary, Indiana at LittleSis.org

One of the partnership’s chief detractors is former mayoral candidate Jim Nowacki. Shortly after the deal was announced, Nowacki filed a lawsuit alleging that the bidding process preceding the agreement was unfair. It is worth noting, however, that Nowacki is not simply a concerned resident; he himself owns 300 tax-delinquent properties in Gary.

MaiaCo did not hesitate to seize on Nowacki’s tax problems. MaiaCo President told the Times of Northwest Indiana that he was “not surprised someone who owns more than 300 tax-delinquent properties would have issues with what the GRC (Gary Redevelopment Commission) is doing to… eliminate blight … and transform Gary. What he should do, instead of filing a lawsuit, is pay his back taxes.”[15]

Other community formations have also raised concerns with the Gary-MaiaCo partnership. In an open letter, the Northwest Indiana Federation of Interfaith Organizations raised strenuous objections with the lack of transparency and public oversight in the negotiation of the agreement noting that the first public forum on the question was not held until July 27th, just two days before the Redevelopment Commission voted on the agreement. The NWI Federation bluntly asserted that “the purpose for MaiaCo’s existence is to take over and decide how to develop some of the best land in Gary.”[16]

Longtime Gary resident and labor educator Ruth Needleman has called the deal a “neo-colonial nightmare.” She has been active in opposing the deal, mobilizing through Northwest Indiana Resist to call for transparency and accountability in the development process. Without an outside community enforcement mechanism, Gary will become the colonial creation of neo-liberal big money Chicago interests… Will the history, traditions, culture and creations of Gary people be stripped away, replaced by gentrified housing and commercial interests unappealing to Chicago?”[17]

Why Gary?

A look at the biographies of the cast of characters involved in this project poses an obvious question: Why are some of the richest and most powerful interests in Chicago investing so much of their time, money and influence in Gary, Indiana?

In part, the intervention of allies of Richard Daley in Gary can be understood as part of a trend of neoliberal revanchism that has been playing out in cities across the country. Throughout the postwar era, suburbanization and white flight pulled affluent whites out of cities like Gary leaving behind cities struggling with disinvestment, poverty, and crime. The crisis was even more acute in industrial cities where the manufacturing bases left along with wealthy and middle-class whites. Decades later, as young whites returned to the cities in search of the authenticity and convenience of urbanism, they found poverty and blight. Rather than blaming the generations of disinvestment and deindustrialization for the deteriorating conditions, white elites blamed the Black populations that had been left behind, taking aggressive measures to “fix” struggling cities.

The history of the city of Gary adds a particularly significant level of symbolism to this trend. Gary elected Richard Gordon Hatcher as the first Black mayor of a major American City in 1967. Almost immediately after Hatcher took office, industrial decline, suburbanization and white flight set in. Now that the era of urban growth has returned, white developers from MaiaCo their consultants from Resolute have returned with bold plans to rebuild Gary.

One of MaiaCo’s early partners, architect Peter Ellis, went as far as saying that MaiaCo would tear down the city. For their part, when a video of Ellis’ statement was leaked and went viral, Gary officials said that they would not work with Ellis and MaiaCo removed him from the project.[18] But even without the bold proclamations about tearing down Gary, MaiaCo and its partners are rebuilding Gary and they are seemingly being allowed to write their own rules in the process.

As rent prices continue to rise in Chicago, developers investing in Gary also see an opportunity to take advantage of the rent gap. Only 40 miles from Chicago’s city center, Gary could become an attractive commuter-city for people working in Chicago. Commuters can make it from downtown Gary to McCormick Place in just over 45 minutes on the South Shore Rail Line.

Employers can also take advantage of a wage gap in Gary. While the minimum wage in Chicago is currently $12 an hour and will soon rise to $15 an hour statewide in Illinois, the minimum wage in Indiana is just $7.25 an hour. So higher wage workers can benefit by living in Gary and commuting to Chicago and employers can take advantage of lower wage workers living in Illinois and crossing into Gary to work.

Another Way Forward for Gary

While right now it appears that MaiaCo and its investors from Resolute Consulting are poised to redevelop Gary according to their own vision and at the expense of current residents, this is not the only way forward for Gary. Gary Planning Director Joe van Dyk makes a compelling argument that the city needs a partner to provide the up-front capital investment to advance redevelopment projects and market opportunities to investors.[19] But that does not mean that the partner needs to be given free rein to implement its own vision for the future of the city.

In its open letter on the MaiaCo agreement, the Northwest Indiana Federation of Interfaith Organizations set forth a series of concrete policy proposals that could ensure that residents are able to benefit from the coming wave of development. Some of these proposals would need to be negotiated with MaiaCo, while there are other ideas that could be implemented by the City of Gary, either unilaterally or in partnership with other stakeholders.

One obvious demand raised by the NWI Federation is a local hiring agreement to ensure that demolition and construction jobs are available to residents of Gary and nearby communities. Another proposal raised by the NWI federation is offering income tax relief for long-term owner-occupants to offer protection against rising property values.[20]
 
 While the City of Gary has already negotiated away much of its leverage with MaiaCo the city still holds control over the zoning process and could pass inclusionary zoning regulations to ensure that new development includes affordable housing for low-income residents. And most importantly the City of Gary could turn control over development back to residents by selling tracts of land acquired through the MaiaCo process to resident groups to be placed in a community land trust.

To be certain, the redevelopment challenges facing Gary are significant. With a childhood poverty rate of 55.9% and one-fifth of properties in the city moving through the tax sale process each year, the status quo was certainly not acceptable. But the current program of privatizing the city’s core re-development work and concentrating huge amounts of power in the hands of a handful of powerful interests from Chicago cannot be seen as an effective model of community-driven redevelopment in Gary.

[1] U. S. Census Bureau, “American FactFinder — Results,” accessed March 28, 2019, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk.

[2] Neil Betten and Raymond A. Mohl, “The Evolution of Racism in an Industrial City, 1906–1940: A Case Study of Gary, Indiana,” The Journal of Negro History 59, no. 1 (1974): 51–64, https://doi.org/10.2307/2717140.

[3] Casey Pfeiffer, “A Challenge to Integration: The Troebel School Strikes of 1945,” Indiana History Blog (blog), March 3, 2017, https://blog.history.in.gov/category/20th-century/great-migration/.

[4] Erick Johnson, “America’s First Black Mayor 50 Years Later | Gary,” Chicago Crusader, November 2, 2017, https://chicagocrusader.com/americas-first-black-mayor-50-years-later/.

[5] Joseph van Dyk, “Gary’s Future: Challenges and Opportunities,” (July 27, 2016), https://garyin.us/redevelopment/wp-content/uploads/sites/2/2016/08/Public-Forum-7-27.pdf.

[6] Chris Arnade, “White Flight Followed Factory Jobs out of Gary, Indiana. Black People Didn’t Have a Choice,” The Guardian, March 28, 2017, https://www.theguardian.com/society/2017/mar/28/poverty-racism-gary-indiana-factory-jobs.

[7] van Dyk, “Gary’s Future: Challenges and Opportunities.”

[8] van Dyk.

[9] Edwin Bierschenk, “Gary Partnership to Focus on Three Locations,” The Times of Northwest Indiana, accessed March 28, 2019, https://www.nwitimes.com/news/local/lake/gary-partnership-to-focus-on-three-locations/article_ffd5f2ea-ff8d-53cd-8c2b-11499e3ee1b9.html.

[10] Edwin Bierschenk, “Gary Approves Deal with Private Redevelopment Partner,” The Times of Northwest Indiana, accessed March 29, 2019, https://www.nwitimes.com/news/local/lake/gary-approves-deal-with-private-redevelopment-partner/article_b9a2fcff-3e51-5e19-b029-e1fa95c1d919.html.

[11] Kelli Chavez, “Public Private Partnerships from a Neoclasical and Keynesian Political Economy Perspective,” University of Chicago SSA Advocates Forum, 2017, 9, https://www.ssa.uchicago.edu/sites/default/files/uploads/AdvocatesForum_2017_PublicPrivatePartnerships.pdf.

[12] Bierschenk, “Gary Approves Deal with Private Redevelopment Partner.”

[13] Resolute, “TEAM,” Resolute Consulting LLC, accessed March 29, 2019, https://www.resoluteconsulting.com/team/.

[14] Carmen McCollum, “Gary Mayor Says Public-Private Partnership with MaiaCo Remains in Place, along with Challenges,” nwitimes.com, accessed February 27, 2019, https://www.nwitimes.com/news/local/gary-mayor-says-public-private-partnership-with-maiaco-remains-in/article_4f189058-f392-5d1a-89d9-113187b61426.html.

[15] Edwin Bierschenk, “Lawsuit Filed over Gary Redevelopment Deal,” The Times of Northwest Indiana, accessed March 29, 2019, https://www.nwitimes.com/news/local/lake/lawsuit-filed-over-gary-redevelopment-deal/article_6dd18534-c221-5ccc-aa4d-8def76325922.html.

[16] Northwest Indiana Federation of Interfaith Organizations, “NWI Federation of Interfaith Organizations: Development vs. Displacement: The Maiaco Story,” Great Lakes Bioregionalism (blog), October 5, 2016, https://garyarea.wordpress.com/2016/10/04/nwi-federation-of-interfaith-organizations-development-vs-displacement-the-maiaco-story/.

[17] Ruth Needleman, “The MaiaCo Contract: A Neo-Colonial Nightmare,” Great Lakes Bioregionalism (blog), August 1, 2016, https://garyarea.wordpress.com/2016/08/01/the-maiaco-contract-a-neo-colonial-nightmare/.

[18] Edwin Bierschenk, “Forum to Address Plans for Gary’s Future,” The Times of Northwest Indiana, accessed March 29, 2019, https://www.nwitimes.com/news/local/lake/forum-to-address-plans-for-gary-s-future/article_c37b915a-89a9-5217-a324-54b23ae2bcc5.html.

[19] van Dyk, “Gary’s Future: Challenges and Opportunities.”

[20] “NWI Federation of Interfaith Organizations.”