In early 1973, the late Joseph B. Danzansky, then president of Giant Food Inc., and a leading spokesman for Washington's business community, issued a strong public appeal for support of efforts to achieve home rule for the District.
Danzansky was not the first prominent Washington businessman to back home rule, but by addressing the issue in a public forum and by treating it as more than just a matter of interest for D.C. residents, he went far beyond the business community's pro forma support at the time.
The leadership of the District's business community, through the Greater Washington Board of Trade, had voted almost a year earlier to support home rule -- a significant step in the evolution of the board which had resisted previous efforts to win self determination for the city.
Danzansky's public call for support of the home-rule initiative was, in effect, a challenge to the mainly white residents and business executives from Washington's suburbs to "extend a hand across the border" to help the predominantly black city achieve home rule.
An early supporter of the idea that the District is an integral part of a single metropolitan economy, Danzansky argued forcefully that the region's economic growth was tied to the city's future.
"A cancer at the region's heart will eventually spread and infect the rest of the economic body," he warned in an address inaugurating a dinner-lecture series sponsored by Gallaudet College.
But in a more pragmatic assessment of the District's probable development under home rule, Danzansky admitted that he doubted whether home rule by itself would solve the District's social and economic problems. His ambivalence reflected, in large measure, the skepticism that many in Washington's business community felt about the eventual impact home rule would have on certain segments of commerce in the city or on the economy as a whole. Indeed, some businessmen recently recalled that there was considerable concern about the prospect of having to conduct business in a new political environment in which power would reside more firmly in the hands of local officials.
Today, 10 years after the home-rule bill was signed into law, local government generally enjoys stronger support in the business community, sharp differences over many issues notwithstanding. Nonetheless, it still is difficult, after a full decade, to quantify the impact of home rule on various business sectors or the overall economy. Dozens of interviews with leaders of Washington's business community over the past two weeks indicated the absence of a consensus on that point.
"The more palpable effect of home rule appears to be political and social, rather than economic," said Luther H. Hodges Jr., chairman and chief executive officer of Washington Bancorporation and its principal subsidiary, National Bank of Washington.
Hodges added, however, that he is "not so sure Congress would have paid any attention to the economic development of the District of Columbia" if the city had failed to get home rule. In the final analysis, therefore, home rule has been a plus for business in Washington, Hodges continued, though he conceded that it is impossible to measure its impact on economic growth.
Most executives whose views were sought on the subject agree that neither the growth nor the decline of certain business sectors, nor the relative strengths or weaknesses in the District's economy, can be attributed strictly to home rule. However, there appears to be a consensus in the business community that home rule has improved relations between the local government and business. There is also general agreement in the private sector that the D.C. government is more responsive to business than it was 10, or even five years ago.
There are dissenters. Gilbert Hahn Jr., a prominent Washington lawyer and chairman of the city council before home rule, rejects the notion that the current administration is any more responsive to business than the first home rule government under former D.C. Mayor Walter Washington or the appointed mayor-city council form of government that Washington headed from 1967 to 1974.
Hahn also shares the belief held by many local business and professional people that home rule really has made little difference either in stimulating development of the District's economy or in who retains economic power in the District. "This is still a company town and the company is the federal government," Hahn declared, adding that economic power remains with the real estate industry and the retail sector, in that order.
Stephen D. Harlan, managing partner of the Washington office of Peat Marwick, Mitchell & Co., offers a sharply contrasting view of the District's development over the past 10 years. Washington is "much more of a commercial hub than ever before, which is a sign that it isn't merely a function of the federal government," said Harlan, a former board of trade president.
Myth and fact are often confused in the discussion of home rule's direct impact on the District's economy. Perceptions have also colored the real picture of business and economic development under home rule.
The most visible sign of economic development in the city in the post-home rule years has been an apparent boom in construction of office buildings. More than 24 million square feet of new office space have been built in the District since 1974. At least 14 million square feet of that total was built during the past four years and an estimated 2.6 million square feet will be added next year. Although D.C. Mayor Marion Barry has touted the redevelopment of downtown Washington as a showcase of economic development in the city the resurgence in commercial development can be attributed to several factors, most of which have little to do with self determination or the city government and Barry's pro-development stance.
On the other hand, the existence of home rule has helped create a perception that the investment climate in the District has improved over the past decade, according to a substantial number of business leaders. With the maturing of an elected local government, investors have become convinced that city officials have a greater stake and interest than Congress ever had in the economic development of Washington.
The business community likes stability, and the uncertainty that it may have felt prior to home rule has dissipated, said Colbert I. King, a senior vice president at Riggs National Bank and a former minority staff director of the Senate District Committee.
While the private sector has driven the District's economic growth, it's the cooperation of the city government that helped bring it about, said John W. Hechinger, president of Hechinger Co., the retail home center chain. However, he continued, "the overall climate of business people investing here -- the trade associations, the new hotels -- is mainly a function of the interest people have in Washington." There is more of a willingness to invest in Washington than before, said Hechinger, who was the first chairman of the appointed city council in the late '60s.
Other factors and forces have shaped the city's economy in the past decade as much as, and perhaps more than, home rule. Some of the same forces have changed the private sector's perceptions of the local government. Washington's importance as the seat of the national government, for example, has taken on added significance for corporate America in recent years. Increasingly, national and international corporations are recognizing the value of having a presence in Washington, where their representatives have quicker access to the Congress and federal regulatory agencies. The same is true of trade and professional associations that have made Washington the No. 1 location for association headquarters. Big law firms, accountants and publicists have also increased their presence here in the last decade, primarily to serve the other groups.
On a more local level, "a whole new industry has been developed" around home rule, according to Hechinger. "A whole legal fraternity developed around the contact between business and the city -- and not with Congress."
The timing of those developments has been propitious for home rule and, in more recent years, the Barry administration.
But in many respects, self-determination has apparently failed to make a difference in the overall growth of the District's economy. Indeed, many of the problems to which Danzansky alluded almost 12 years ago continue as threats to the District's economic base.
"The fact is, there has been a lot of hype about economic growth in the region , that everthing is all right," R. Robert Linowes, a prominent Washington lawyer and civic and business leader, remarked recently. "You walk down the street and you see cranes and new buildings going up. That's important but who is going to be employed in those buildings?" Linowes asked before answering his own question by noting that most of the employes will come from the suburbs.
Linowes' query was prompted by a report showing overwhelming evidence that the District's employment base has contracted over the past 17 years, a massive buildup of office space notwithstanding. The pattern remains unchanged despite a broader commitment by the mayor to economic development -- a strong indication that with or without home rule, the District's employment problems are similar to those of other major urban centers.
"From an economic development standpoint, the most pressing issue in the District is the creation of jobs," said Lewis Bolan, vice president and director of Real Estate Research Corp.
Employment shrinkage in the District "reflects the growing economic competition provided by the suburban jurisdictions, where labor forces and markets grew during the '60s and '70s along with the population," said Stephen S. Fuller, professor of urban and regional planning at George Washington University. Those conditions, Fuller continued, helped to stimulate a redistribution of employment within the metropolitan area. The result, he concluded, is that the outlying suburban areas are growing partly at the expense of the District.
Suburban jurisdictions have been successful not only in attracting new businesses from outside the area in the past 10 years, but have managed either directly or indirectly to lure substantial numbers of firms from the District. And while the District continues to lose firms in an exodus that began in the wake of the 1968 civil disorders, the suburbs are developing broader-based economies, with as many as six strong employment sectors, compared with only two -- government and services -- in the District.
Several firms formerly located in the District have departed, not so much because they oppose home rule, but because the costs of doing business have made it difficult for them to remain in the city, executives of those companies complain. Noncompetitive tax structures, high unemployment compensation, soaring land costs and escalating rental rates, are typical examples of the reasons many businesses give for abandoning the District.
Perpetual American Bank, for example, moved its corporate offices and operations center to Alexandria three years ago, after more than 100 years of operation as the District's largest savings institution. The reason, said Perpetual American Chairman Thomas Owen, was the high cost of doing business in the city.
"The District doesn't want the small entrepreneur," lamented Richard Bergmann, president of one of the area's largest home-delivery laundries. Bergmann's, which traces its origin in the District to 1917, moved to Northern Virginia last June, carrying with it 250 jobs. By moving, the company cut its property taxes from approximately $250,000 to about $30,000 annually, Bergmann claims.
"It is bad economics to stay in a place where the taxes are so heavy. Who can afford that?" Bergmann wondered. "It is hard to move. It was one of the hardest decisions in the world."
Factors other than costs (lack of adequate space, for example) have influenced business decisions to move to the suburbs, but the end result has been the same -- the perception of a better business climate in the District under home rule has done little to stop the erosion of its economic base.
One measurement which tends to support that is the Gross District Product, as defined by Chesapeake & Potomac Telephone Co. economists. The GDP has remained relatively flat over the past four or five years. Several leading indicators that make up the GDP have steadily declined since 1974, in fact. The trade-sector index, for example, has dropped each year since 1973, for a total decline of 20 points. Building permits have fallen off drastically, despite heavy commercial construction activity, and the finance, insurance and real estate sector has changed little since 1979.
Only the services sector that has become a twin engine along with government in driving the local economy has shown appreciable gains over the past 10 years.
All things considered, however, a sizeable segment of the District's private sector maintains that business is better off under home rule. Home rule makes little difference in the type of business his law firm does, says lawyer Robert B. Washington Jr., who was chief counsel for the House District Committee when the home rule bill was enacted. But, says Washington, "As far as responsiveness of the [D.C.] government and the interest of the city government in problems of our business, we find [the home rule government] present and real."
"There's no question in my mind that home rule has been a healthy thing in terms of the relationship between business and the District," said Philip M. Dearborn, vice president of the Greater Washington Research Center and former financial counsel to Mayor Barry. "Unfortunately, I don't think that the District has been as successful in restoring confidence in some outlying areas (outside of the business center) of the city. I don't know that home rule has anything to do with that, but I think there was hope that the government would be able to do more in the outlying areas" of the city, Dearborn observed.
The home rule government has, on the other hand, done more to increase opportunties for minority firms to share in city contracts for goods and services. Without a mandate from the electorate under the home rule charter, that might not have been the case.
But if home rule has done anything to change the course of business in the city, it is the forging of a new relationship between the public and private sectors. It was common before home rule for many of Washington's business leaders to deal directly with legislative committees on Capitol Hill, recalled Delano Lewis, a former aide to D.C. Del. Walter Fauntroy.
But after home rule went into effect, "the shift in power went to City Hall," said Lewis, now a vice president with C&P Telephone Co. "The business priorities that were here 10 years ago are still here today. The thing that's changed is how you influence what gets done."
"I think it's been a mutual training and learning exerience" for business and local elected officials, commented John Steen, retired president of Lewis and Thomas Saltz Co.
Steen credits the the Board of Trade with playing a major role in encouraging a mutual understanding between business and elected officials. But more important, in Steen's opinion, is the change in the board's philosophy over the years. "You can't say no to everything," he said, referring to pre-home-rule years when the board was generally regarded as a rigidly conservative organization whose interests were more narrowly focused on business issues.
Although it opposed the home-rule concept in 1965, the board earlier supported a constitutional amendment that gave D.C. residents the right to vote in national elections for president and vice president. Opposition to home rule gave way in April 1972 when directors of the Board of Trade voted to support efforts in Congress. Board officials say the vote was unanimous, but a former director insists the margin was a single vote.
John Tydings, the Board of Trade's executive vice president, said he believes that reforms in two areas considered critical to business -- worker's compensation and unemployment compensation -- "really helped sustain and define home rule." Legislation adopted by the city council bringing about reform in both areas was either drafted by the board or amended to reflect its position that high-cost compensation programs threatened to drive businesses from the District, further damaging the economy.
Tydings, whose tenure with the board spans almost 20 years -- longer than any other staff member -- offered the following perspective on home rule's impact on business: "I think home rule has accelerated the pace of development in the city by virtue of the fact that it helped create an identity." But, added Tydings, "I think the D.C. government has got to sharpen its image as a pro-economic development" entity.
Although Tydings credits the D.C. government with helping the Board of Trade to become more involved in District affairs, the relationship between business and the local officials was "plenty rough" in the early years of home rule, recalls John E. Sumter Jr., former vice chairman of American Security Bank. "The financial institutions were the real whipping boys at the time. There was a feeling [among some newly elected city council members] of 'damn the banks; they were down on us over the years and we're going to get even with them.' "
Sumter conceded that in the years prior to home rule, some bankers in the District probably gave the industry an unsavory image because of their lending policies and reluctance to invest in certain areas of the city. Older bankers, he explained, "were locked into old habits and old ways of doing business. I don't think we had that animosity of feeling. We were concerned about the city, and the banks by then had younger, more progressive managers and directors."
Largely through the efforts of Sumter and a special committee of bankers that was formed to work with community groups and the new home rule government, feelings of antagonism and retribution dissipated and "things have improved," Sumter noted.
There was a time after home rule became effective, however, when D.C. bankers and District officials came perilously close to exacerbating those feelings of antagonism. An attempt to raise the gross receipts tax on financial institutions from 4 percent to 8 percent stirred a storm in the local financial industry before the two sides settled on a compromise that permits firms to pay the higher amount of corporate or gross receipts taxes.
Since home rule, the implementation of streamlined procedures in local government agencies has enhanced business growth by eliminating much of the bureacratic maze that caused lengthy delays in the zoning, licensing and permit processes. Several members of the business community say that streamlining is a direct result of Mayor Barry's commitment in his first term to reform cumbersome administrative procedures that were in effect when he first was elected mayor in 1978, four years after home rule was implemented.
But that reflects more a change in management and style than anything else, and has little to do with home rule, several members of the private sector suggest.
While it is difficult to tell what would have been different in the absence of home rule, the change to a new form of government has been "a positive thing," observed W. Jarvis Moody, chairman and chief executive officer of American Security Corp. and its principal subsidiary, American Security Bank. "We always get a hearing," Moody said.
"There certainly has been an improvement in the responsiveness of city government in trying to get our day-to-day job done," agreed Robert Gladstone, president of Quadrangle Development Corp. "There is a listening ear at the city council and at the administration level, even though we don't always get what we want," Gladstone said.