Philadelphia Mayor Ed Rendell came to Wharton with a good news/bad news scenario for Philadelphia and the rest of the urban areas in the U.S.

First, the good news: "American cities have been blessed in the 1990s with pragmatic mayors who were not burdened with the ways of the past," said Rendell, who earlier this month was named Democratic Party national chairman. "In American cities, things are going very, very well."

Rendell, speaking at Wharton’s Gruss Public Policy Forum Series on October 25, noted that despite a cut in business taxes, Philadelphia has gone from a $235 million deficit early in his administration to a surplus in 1999, the last of his eight years in office. Rendell pointed to $2.5 billion in current construction projects, including the Penn’s Landing waterfront development, 14 new hotels and a regional performing arts center.

"And people are moving back into Center City," he said, noting that only 69% of apartments were filled when he first won the election in 1992 and that now 100% of available Center City apartments are rented. "There is a rush to move downtown."

Now the not-so-good news, or, as Rendell put it, "the other picture–and that picture is not a pretty one."

Rendell acknowledged that while the city’s rich and middle classes are profiting from the national prosperity, many other city residents are being left far behind.

"I could take you from our glittering downtown in 10 minutes to places where there is 70% male unemployment," said Rendell, who didn’t hesitate to show the flip side of his nationally-touted Philadelphia miracle. "From the time of birth until they are 10 or 11, the kids there are wonderfully optimistic, just like the kids in any wealthy place. But at 12 or 13, reality sets in."

Rendell said the apparent dearth of opportunities leads these same formerly optimistic kids to turn, in all too large numbers, to drug abuse, crime and school absenteeism. He used the rate of cigarette smoking in inner-city Philadelphia as a metaphor for its ills.

"For poor urban young people, the rate of smoking is up dramatically," said Rendell. "You can’t go to a 15-year-old in Philadelphia and say, ‘If you smoke, you’re going to die at age 50.’ They are worried that they won’t live to see 25. The same thing that motivates other people, hope for the future, hardly exists for many in Philadelphia. There are huge holes in the mosaic.

"American cities, left on their own, can compete in the margins, especially when there is prosperity. But when the recession comes, we may well be on the ropes," he said. "There are so many things we could do to enhance the city were we not the sole repository of the nation’s poor."

Rendell then asked the audience if anyone had ever seen subsidized housing in Paris. None exists, he said, since in Europe, co-operation between governments usually puts initiatives like subsidized housing, not to mention prisons and halfway houses, in an inner ring of suburbs.

"Cities are prized as jewels, gems," said Rendell. "They are where people want things to thrive."

Rendell doesn’t expect federal policy toward the cities to change abruptly, but he pointed to several areas where he hoped some accommodation could be made to change what he called a "systematic imbalance" between cities and the rest of the country.

First, he said, cities have to become "lean and mean," reducing taxes and streamlining services. They have to make it attractive for businesses to come to town, he said, since there is no longer an absolute need for them to do so. A generation ago, insurance companies, banks, law offices and other businesses had to be in the same general area, but now, with e-mail, Internet, faxes and so forth, that is no longer the case. Cities need to make themselves attractive for businesses in other ways.

Second, the federal government has to help cities, not by throwing money at them, but by earmarking certain tax and spending credits. Rendell pointed to federal empowerment zones, where companies are given tax breaks to locate in certain city districts, as a good start in that area.

Rendell also looks for more state help. He gave Pennsylvania Gov. Tom Ridge an "A" for his advocacy of the Keystone Opportunities Act, which basically gives businesses a free ride without taxes for up to 12 years if they locate in depressed city areas.

Finally, acknowledging it as a long shot, Rendell said he hopes for true regionalization, what he called "burden-sharing" between cities and their suburbs.

"We fund the Philadelphia Museum of Art, but only 17% of the admissions are from Philadelphia residents," he said. "We talk about building and paying for new stadiums in the city, but only 25% of those who attend Phillies baseball games and 33% of those who attend Eagles football games are Philadelphia residents."

Though he pointed to regionalization efforts in Minneapolis/St. Paul and in Rochester, New York, Rendell admitted that it is not likely to happen on a big scale in many other places. Still, he said, Philadelphia could hope for assistance in, say, regional transportation issues or cooperation in arts funding.

"So we can’t put our head in the sand," he said. "Despite all the good things we have seen here of late, cities will not thrive or even survive in the next recession unless the imbalance in the way we do things between cities and suburbs is corrected. Welfare reform is a roadblock to this, but a recession would be a knife in the throat."

Nonetheless, Rendell remains a booster of everything that Philadelphia, and cities like it, have to offer the young job-seeker. "Let’s say you are a Wharton MBA and deciding on two local insurance companies to work for, Penn Mutual and Cigna," he said. "Penn Mutual will take you to its Horsham headquarters and if you squint real hard, you can see another building on the horizon. A five-minute drive will take you to McDonalds. Eight minutes, you’re at Burger King. In 12 minutes, you are in the suburban culinary highlight, Friendly’s.

"Now you go to Cigna in Center City," he said. "For lunch, they take you to Le Bec Fin and for dinner, it’s Striped Bass [two hot dining spots]. You take a short walk through the vast shopping area and maybe there is one of the almost daily festivals going on.

"Clearly, there is a great advantage to cities that suburbs cannot match," he said. "If we could slim down that competitive imbalance just a little bit, boy, we could really knock them dead."