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Outward and Inward
Omaha's one-two punch: It swallows nearby suburbs and then taps new residents for money for downtown cultural institutions
By JOEL MILLMAN AND KAREN RICHARDSON
July 28, 2008; Page R5
Clear it, and they will build. That's part of the formula that has made Omaha, Neb., one of the nation's biggest success stories.
Omaha ended the last century as one of the most disadvantaged cities in the U.S. Its downtown was crumbling, as businesses closed and residents fled to the suburbs. And there wasn't much else in the area to latch onto: To the east, the city is pinned against a shallow, commerce-free river, and in the other directions it faces a prairie with a dwindling population.
Yet today Omaha is thriving, thanks to an ambitious renewal strategy -- and an especially generous populace.
This city of 433,715 has grown outward by gobbling surrounding suburbs and inward by clearing out big, rusting chunks of its downtown and pouring hundreds of millions of dollars into arts and entertainment. Lots of cities have tried similar strategies, but Omaha had a singular advantage: strong civic leadership.
As the city swallowed all those nearby towns, it added thousands of wealthy suburbanites to its rolls -- and they have proved instrumental in organizing and funding the downtown renewal drive. They have ponied up the bulk of the money for the projects and often outperform the city in raising cash.
Take the Qwest Center Omaha, an 18,500-seat indoor arena that opened in 2003. Built for $291 million, about a quarter of its construction was funded by wealthy locals. Two years after opening, Qwest ranked in the top 10 among tickets sold for entertainment facilities world-wide. Last year, it drew more than 320,000 ticket holders.
"Our goal was to make Omaha the place to be on weekends," says Roger Dixon, the director of the center.
The Big Turnaround
Of course, there are limits to the strategy. For one thing, the city may not be able to expand outward much farther, since it's running out of towns to annex. (Residents often joke that if Omaha keeps going, the city might as well annex Lincoln, the state capital.) And some new residents lament the city's relatively high taxes, saying that the burden keeps them from retiring to the city.
For all the potential pitfalls, however, Omaha remains a striking success story. Among the dozens of U.S. cities with faded downtowns, few can match Omaha's efforts to remake itself.
Its downtown is growing into a Mecca for the arts, both popular and highbrow. Besides the Qwest arena, private donors have helped fund the $92 million Holland Performing Arts Center, set on land where Swanson once churned out TV dinners. Up next: a $140 million minor-league baseball stadium, key to holding onto Omaha's signature sports franchise, the College World Series.
As the big-ticket attractions proliferate, smaller players squeeze in. Film Streams, an arts cinema that doubles as an opera house, came in last July, right next to the trendy rock club and independent record-company offices. All three still face a vacant lot, but probably not for long.
Omaha's efforts began in the mid-1990s, when the city put together a planning commission to revive the downtown. The group decided to undertake radical surgery on the city's industrial core. With a mix of private and public funds, the city cleared out hundreds of acres of old railroad tracks, sprawling scrap-metal yards and an ancient lead smelter abandoned by Asarco Corp.
"It was so ugly, you just closed your eyes coming in from the airport," recalls Connie Spellman, director of an urban-policy group called Omaha By Design. The ride in from the nearby interstate highway was almost as dismal -- rusted railway bridges and concrete ramps that dropped motorists into an empty downtown, freezing cold much of the year.
After clearing out downtown, city planners courted new tenants to fill it. The city pushed its reputation for wholesome Midwestern values and top-notch schools, as well as its flurry of arts spending.
In 2000, the city landed a big new resident: Gallup Inc. The polling organization agreed to move its headquarters from Lincoln to a site in Omaha overlooking the Missouri River, where the old Asarco smelter once stood.
Meanwhile, three older downtown residents -- Union Pacific Corp., First National Bank of Omaha and newspaper publisher Omaha World-Herald Co. -- unveiled proposals to reinvest downtown, plowing millions into new corporate homes. Today, all three companies work out of new office towers, anchoring a work force that the city's economic-development office puts at 40,000 individuals in a 33-block central core, with almost 50,000 more within walking distance. Among their big neighbors: ConAgra Foods Inc., which moved a crew of top managers down from Minneapolis.
As companies have moved into the city, so have lots of new residents. The downtown area has added about 2,300 households since 1990 -- a huge total for a city of Omaha's size. New homeowners tend not to be the bohemians often associated with early stages of gentrification, but a slightly older demographic: bankers, attorneys and managers for Omaha's leading corporations. The very types, in other words, who patronize the opera and can afford to pay $100 and up for Bruce Springsteen tickets at the Qwest Center.
But that's not the only way Omaha has added new residents. The city has also undertaken a relentless annexation strategy.
Under Nebraska law, any incorporated city can annex any other jurisdiction and add its tax base to its own. The only restrictions: The targeted towns must have fewer than 10,000 people and be located in the same county.
Over the past decade, Omaha has added between 600 and 3,000 people to its rolls each year, essentially by following affluent Omahans as they move west into outlying Douglas County. The biggest bump along the way: In 2006, the town of Elkhorn sued in Douglas County District Court to stop Omaha's land grab, arguing it was too big to be annexed. Elkhorn lost.
In a way, Omaha's mergers and acquisitions mirror those of its most famous corporate citizen, Warren Buffett. Like Mr. Buffett, Omaha is interested only in top performers. Tax revenue from any annexed district must exceed its debt service. Usually, that means Omaha waits until a village like Elkhorn is well into paying off the cost of laying down streets and water lines before it swoops in.
Other U.S. cities grow by acquisition, notably Albuquerque, N.M., and Oklahoma City, and Omaha's leaders are unapologetic about the tactic. The alternative, they say, is to face the fate of St. Louis or Kansas City -- places that have steadily lost population since the 1950s, in some cases to less than half their historic peaks. Omaha, with 433,715 residents, would have fewer than 250,000 if it were confined to its 1960 limits.
The strategy brings a number of advantages, Omaha officials say. Not only can the absorbed towns lower costs by sharing public services with the city, there's no need for them to compete for commercial development.
"We often have national companies, who are skilled at playing one community against another, ask us what incentives we provide to encourage them to build their store in Omaha versus another community," says Steve Jensen, the city's planning director. "They're usually surprised when we tell them we don't offer any."
A Stake in Tomorrow
Most important, growing the city geographically means giving those affluent suburbanites a stake in decisions made for downtown. Instead of becoming an impoverished inner city surrounded by wealthy suburbs -- and appealing to outside philanthropies or the federal government for aid -- Omaha has grown used to spreading its wealth.
"If you don't have a growing city, you don't have much of an opportunity to grow arts and culture," says Omaha's mayor, Mike Fahey. "And that quality of life is essential for any economic development."
As Omaha expands outward, city fund-raisers make sure to target one group of suburbanites in particular: Berkshire Hathaway investors. The area has a deep vein of private wealth centered around Mr. Buffett's conglomerate; many residents bought into the company in its early days and reaped impressive gains as it grew.
"You literally have the case of the college professor and his wife who scraped up $1,000 to invest in the beginning," says John Gottschalk, former publisher of the Omaha World-Herald and an arts supporter. "Today, that guy has $200 million he doesn't know what to do with."
--Mr. Millman is a staff reporter for The Wall Street Journal in Portland, Ore. He can be reached at joel.millman@wsj.com. Ms. Richardson is a former staff reporter in the Journal's New York bureau. She can be reached at reports@wsj.com.
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