This is just about a mile southwest of the Penn and CHOP mega-medical complex, but those towers seem a world away. In this forgotten fragment of the city, up-jumped weeds form a forest canopy in long-abandoned lots. Roads end abruptly, melting into the overgrowth. Ivy has reached the top floor of the old city incinerator, climbing through the broken windows.
Grady — 47 years old, white, with the look and bearing of a stereotypical mid-career executive — seems just a bit out of place here. We pass discarded mattresses, a 1960s-era refrigerator, a pink toilet and a dead cat. Grady turns his silver Buick LaCrosse down a cobblestone road — it’s 49th Street — that’s usually closed to through traffic by a locked cyclone fence. Today, though, the gate is open, so Grady punches the gas, bumping the Buick across a CSX rail line and past the first two people we’ve seen in blocks — a couple of rail workers. One of them flips us off. Grady seems not to notice.
He’s too busy imagining an altogether different future for this squalid patch of overlooked urbanity. Grady looks and sees Philadelphia’s next “innovation district,” with some two to three million square feet of new offices and laboratories, a gleaming riverfront road, and recreational trails that would make this bastard stretch of the Schuylkill every bit the equal of the jogger-choked path to the north.
It all sounds fantastical, given the present-day landscape. But Grady is the president of the Philadelphia Industrial Development Corporation, a little-known but extraordinarily powerful joint venture between business and City Hall.
More than half a billion dollars in public and private grants and financing — for everything from small-business equipment loans to city and state subsidies for Comcast’s new skyscraper — is budgeted to pass through PIDC this year. And the organization has been at the center of most every mega project of the past 50 years: the Navy Yard, the Pennsylvania Convention Center, the Center City hotel boom and much more.
So when Grady dreams, it makes sense to listen. He notes that we’re just five minutes from the heart of University City by car, or by trolley. He tells me about the voracious expansion needs of nearby Penn, CHOP and Drexel, institutions that think about development in chunks of 10 and 20 years.
Grady has been selling cities for a long time. These days, there are more buyers out there. “When I graduated college in the late ’80s, the popular thing was to move to the suburbs. You went as far out as you needed to buy a house, and you put a fence around your house and you drove to work every day,” says Grady, who, as it happens, did none of those things. (He lives in East Falls.) “That paradigm has shifted dramatically for people, and relatively quickly.”
In another city — one with a more robust business culture, with bolder builders, with more capital and fewer built-in obstacles to development — it might be a maverick developer or some far-sighted technology company looking to reclaim the riverside wilds. But this is Philadelphia, where it took 83 years for someone to find the stones to erect a building taller than City Hall. As much as any organization, it’s been PIDC and its roster of powerful leaders, past and present, that has filled this visionary vacuum.
Grady has served as PIDC’s president for just three years. But he has already emerged as one of the city’s leading problem-solvers. I think of him as the unflappable traffic cop in the hectic three-way intersection of government, business and the nonprofit sector.
And in this town, for better or worse, that’s where a lot of the action is.
BY FEBRUARY 1994, there was little hope left for the Navy Yard, which had been building ships and employing vast numbers of Philadelphians for more than a century. The politicians were dragging the imminent closure out as long as they could, and another 19 months would pass before the base was formally shuttered and, ultimately, 7,000 civilians would lose their well-paying jobs.
In preparation, leading regional economists, architects and urban planners met at the University of Pennsylvania to ponder what else might be done with the 1,425-acre site. Some suggested it would serve best as a prison. Others proposed turning it into marshland. The most likely scenario, many of the academics agreed, was that the yard would simply rot, lying fallow until some distant future when a market might exist for so much riverfront land.
John Grady had a different view. He was no Pollyanna, having grown up in Olney and worked in Camden prior to joining PIDC. But Grady, like most economic-development professionals, is allergic to the notion that cities must surrender to adverse market forces, particularly when the stakes are as high as they were for the Navy Yard.
The son of two educators, Grady became fixated on the central necessity of jobs while taking an undergraduate seminar at La Salle University. The course — taught by John Raines, the celebrated Temple professor who early this year revealed himself as one of the eight anti-war activists who burgled an FBI office in Media in 1971 — focused on the ethical value of work. “It showed what it means to people, to communities,” Grady says now. “It was about how work sustains us on many different levels.”
Straight out of school, Grady took a position with Camden’s waterfront economic development agency before moving over to PIDC in 1998. Ever since, Grady has been the point man on the massive conversion of the Navy Yard, which really should be considered one of the most successful urban reclamation projects in recent U.S. history. When the Navy (mostly) moved out, it fell to PIDC to coordinate the integration of the yard into the city. There was no zoning, no street grid, no sanitary connection to the city’s sewer supply, no post-office addresses.
Now the Navy Yard has all that, plus office and manufacturing facilities for 143 companies employing more than 11,000 workers. It’s home to behemoths like Urban Outfitters and the U.S. headquarters of GlaxoSmithKline. It’s become a favored destination for fast-expanding homegrown businesses like motorcycle-gear retailers RevZilla.com, which in the past could well have ended up out on Route 202, or in some other suburban destination.
Critics of the Navy Yard generally charge that it cannibalizes Center City, stealing away tenants that otherwise would be renting office space in skyscrapers. But Grady has little patience for this complaint, and he makes a good case. Consider Urban Outfitters. Floors in an anonymous office tower would have been all wrong for such a company. Richard Hayne wanted a campus environment, with distinct buildings for the company’s different brands and the ability to expand over time. Similarly, Glaxo wanted a radically new kind of office, one with as few walls as possible and more worker mobility — a poor match for the stock in Center City.
As remarkable as the Navy Yard’s reinvention already is, it’s nowhere near complete. On a summer afternoon, with airplanes roaring overhead and the sun reflecting off the immensely wide stretch of the Delaware River that frames the Navy Yard, Grady showed me a bit of what’s yet to come.
There’s the seven-acre park under construction in the yard’s office district, designed by the same landscape architecture firm that designed New York’s High Line park. There’s the Penn State engineering campus, also under construction, and two vast loft-style warehouse buildings on Kitty Hawk Avenue that could become the Navy Yard’s first residential developments. “Ultimately, what we’re doing is we’re building out a whole new neighborhood,” says Grady.
Projects as enormous as the Navy Yard, projects that require massive new infrastructure investment and comprehensive planning, are, I would argue, well served by an organization like PIDC.
Founded in 1958, during the first term of reform mayor Richardson Dilworth, PIDC was created to try and staunch the city’s bleeding of industrial jobs, and to serve as something of a hedge against the government-driven urban renewal policies that held sway in Philadelphia and many other big cities in the post-World War II-era.
From the start, business was the ever so slightly more senior partner at PIDC, with one more representative than City Hall on the organization’s board of directors. But PIDC power struggles between the Chamber of Commerce and City Hall are exceedingly rare, and as a practical matter, a lot of the organization’s clout has rested with its succession of long-serving presidents (including Grady) and with Walt D’Alessio, who has acted as PIDC’s chairman since 1982.
At its best, PIDC combines government’s focus on the public good with private-sector flexibility and competence at executing complex tasks. With a staff of 62 and an annual operating budget of about $10 million (virtually none of which is taxpayer money), PIDC has resources that dwarf those of the city’s Commerce Department. Grady’s salary, for instance, is $230,000 a year, more than Mayor Nutter earns. Grady also has a free hand to run the organization as he likes, unbound by civil service rules or union contractual restrictions.
Ostensibly, City Hall sets policy and PIDC executes. The reality is that the two entities “operate as a seamless organization,” says deputy mayor and Commerce director Alan Greenberger. “They’re not shy about making recommendations about policy, and we’re not shy to weigh in on transactions.”
Bill Hankowsky, one of Grady’s predecessors at PIDC and now the president and CEO of Liberty Property Trust, likened his old job to “translating to government how business works, and translating for business how government works.”
That training worked out well for Hankowsky, obviously, and for D’Alessio, the former senior managing director of NorthMarq Capital. Indeed, PIDC alumni are all over any roster of Philadelphia power players, past and present. There’s Joseph M. Egan, the onetime Republican mayoral candidate, who preceded Hankowsky as PIDC president in the late 1980s; John Gattuso, a onetime PIDC staffer who’s now a big wheel at Liberty Property Trust; Charles Pizzi, former PIDC board member and Tasty Baking CEO; and so on.
Grady chalks this up to PIDC’s appeal to those “who want to roll up their sleeves and make a positive contribution,” and tells me the organization “attracts a lot of people early in their careers who have an interest in development, in building businesses.”
That’s self-evidently true. It’s also mildly disturbing that in Philadelphia, mastering the intersection of business and government is seen as such a building block to success. The men — and they are almost all men — who rise to the top of the economic and power heap in Philadelphia typically aren’t audacious entrepreneurs or market-creating pioneers. They are, more commonly, those who have learned how best to work with City Hall.
PHILADELPHIA IS HARDLY alone in its reliance on an entity like PIDC. Economic development organizations and programs abound across the country. Some are public, some are private, some are a mix of the two, but at their core, these programs and agencies all exist to create or save jobs and revitalize communities. And who can argue with that?
At their worst and most venal, economic development organizations are little more than filling stations for politically connected developers and businesses, offering grants, tax breaks, dubious real-estate deals and low-interest loans for City Hall’s favorite sons. Some have become the playthings of powerful political figures: Think of Vince Fumo and Citizen’s Alliance for Better Neighborhoods, or Jerry Mondesire’s Next Generation CDC.
A more common failing is the well-intended organization or government economic development program that ends up squandering public money, or signing away tax revenue, or building boondoggles. Consider all the minor-league baseball stadiums built with public funds, the niche museums that nobody visits, the massive tax breaks offered to companies simply to move their operations across a county line. (Just this summer, Camden and New Jersey traded away $82 million in tax credits to snag the sad little plum of a new Philadelphia 76ers practice facility.)
The rationale for these sorts of giveaways is pretty simple: Without them, the jobs would go elsewhere. For low-income cities like Camden and Philadelphia, the need for jobs has been so acute, for so long, that the impulse to give away the store when wooing companies can be overwhelming.
But it’s an urge that Philadelphia, at least, should start to fight. The notion that we can’t compete with other cities or the suburbs just doesn’t hold up as well as it used to, given the spike in educated millennials living in the city, and that our population is growing again after decades of decline.
“This is internalized oppression. It’s like you’ve been told for so many years that you’re worthless that you begin to believe it about yourself,” says Greg LeRoy, executive director of Good Jobs First, a progressive Washington, D.C.-based nonprofit. “A lot of public officials in cities like Philly have internalized these beliefs, and that sets them up to be weak negotiators.”
PIDC has certainly had its own moments of weakness. It had a small financing role in the “Disney hole” at 8th and Market, and so far, with bookings dramatically off projections, the $786 million Convention Center expansion is looking more like an expensive folly than a boon to the city’s hospitality business. Then there are PIDC-assisted projects that could be reasonably argued either way: the subsidies for the stadium complex, incentives for Center City hotel construction, a low-interest loan to an on-the-ropes Tasty Baking.
When I put this critique of economic development to Rob Wonderling, president of the Chamber of Commerce and PIDC vice chairman, I can almost hear him shrugging over the phone. “What aspect of the free market is not subsidized?” he replies. “We’ve had incentives for a long time. They might have different names or flavors now, but we’ve always had them, whether you call it urban renewal or a tax incentive.”
GRADY, THANKFULLY, IS much more stingy. “If we worked our way out of existence, that’d be great,” he tells me at the Navy Yard. That’s highly unlikely to happen, of course, but it’s the right attitude.
And Grady seems to think we’re at a moment — with cities resurgent — where Philadelphia actually could become a place that needs PIDC just a little less. “Can we use this momentum to solve other problems?” he asks. “Can we use it to reenergize neighborhoods? Can we use it to put school systems on a different trajectory? Can we use it to continue to reinforce quality of life and the centrality of Philadelphia for this region?”
It’s good Grady thinks along those lines. Because while PIDC’s lasting prominence does Grady and his staff credit, it’s also an indictment of Philadelphia’s economic vitality and dynamism. The downside of relying so long and so extensively on an organization like PIDC is that it perpetuates the dependency of city businesses on City Hall. That’s a formula for a weak-kneed business culture, and it’s hard to see how that kind of dynamic creates more jobs than would a more independent, less risk-averse business class.
Grady, though, is a pragmatist. “I think it’d be great if we had a completely functioning market in Philadelphia,” he says. “In the meantime, we have to roll up our sleeves and intervene.”
Originally published as “The Dealer” in the September 2014 issue of Philadelphia magazine.