A blueprint for the city

Ted Crone, the resident deep thinker on regional economies at the Federal Reserve Bank of Philadelphia, has witnessed the region's highs and lows for more than 25 years.

And as this former Catholic seminary teacher with an economics doctorate nears retirement, he has two big concerns: The Philadelphia region has to create more high-paying service jobs for its residents, and the city has to repair its public-education system.

Poorly educated workers will be hired into lower-paying jobs, said Crone, who is vice president and head of the Philly Fed's regional economics section.

"If we don't fix the public schools, we aren't going to fix the problem," Crone said. "We need to strengthen the school system across-the-board," he said, "so people can get into college and get through college."

The issue has gotten recent traction with other groups. According to the report "A Tale of Two Cities" from the government-supported Philadelphia Workforce Investment Board, about one in four city residents dropped out of high school, which is double the national average, and 60 percent are considered poor readers.

Philadelphia also has a low proportion of college graduates, partly because of college dropouts. Eighty thousand city residents between 25 and 45 enrolled in college but failed to graduate, the report says.

Crone, 66, a professorial-looking fellow with glasses and a trimmed beard, has stayed out of the media spotlight over the years. But he is known to people who monitor labor and business trends in the region. He has spoken regularly at public forums and served as a behind-the-scenes adviser to the Pennsylvania Intergovernmental Cooperation Authority. PICA was formed to help bail the city out of its financial mess in the 1990s.

With a background in religion, Crone taught the New Testament at St. Patrick's Seminary in Menlo Park, Calif., before earning a doctorate in the so-called dismal science at University of California at Berkeley.

He said there was a connection for him in the two fields. Theology focuses on an individual's spiritual well-being; economics focuses on a person's financial well-being. An individual's spirituality will suffer if he cannot pay the bills, he said.

Crone joined the Philadelphia bank at one of the region's low points, late 1981. The deepest recession since the 1930s gripped the region. The unemployment rate in Pennsylvania would rise to within a whisker of 13 percent, a 30-year high, by March 1983.

The region weathered the crisis. Then, the city's near-bankruptcy experience in the early 1990s forced Philadelphia to cut municipal costs and rebuild its tattered reputation. Tens of thousands of private-industry jobs were lost as businesses relocated to the less violent and lower-tax suburbs.

Crone acknowledges the hard times but takes a broadly positive view.

A little cable company, Comcast Corp., has grown into a national giant. It soon will have the highest high-rise in town - the 57-story Comcast Center. "Here's a company that I don't know if it existed in 1981," he said.

Delaware has shed its image as the "chemical capital of the world" for financial services, such as credit-card processing, Crone said.

A January 2002 research report from Crone's section in the Philly Fed shows how rapidly financial services grew in Delaware. In 1980, the finance, insurance and real estate sector accounted for 13 percent of Delaware's gross state product. By 1999, the sector accounted for 40 percent. Gross state product is an estimate of the value of all the goods and services produced in a state.

The biotech industry sprouted in the Philadelphia region, giving the economy entrepreneurial buzz, Crone said. Colleges and universities expanded payrolls and enrollment, bringing students and dollars from outside the area.

With new office towers in the 1980s and 1990s, Philadelphia "got the look of a strong service economy instead of the look of a low-rise Northeast city," he said.

With the face-lift, it is a consumer city - like Boston, New York and Chicago - and not a ho-hum commuter city that workers flee when the workday ends, Crone said. Center City's higher real estate prices are a good sign: People want to live there.

He is excited with the prospect of new museums on the Benjamin Franklin Parkway because he said he believed expanding tourism had been a Philadelphia success story.

"Increasing the value of your location is the key to regional economies," Crone said. "You take advantage of your opportunities" - whether it's a good port or a historic setting, he explained.

On the East Coast, Philadelphia has kept pace with the other big cities, with the exception of Washington, Crone said. Washington boomed with an expansion of the federal government and new information-technology companies.

Philadelphia, Crone said, has to supply police protection and other services efficiently and dismantle regulatory, bureaucratic and financial obstacles for companies.

"The magic bullet is making it easier for everybody to do business," he said.

One day earlier this month, Crone was packing economic journals into boxes. The Benjamin Franklin Bridge loomed outside his window. He said he did not have specific plans for his retirement, other than a six-month "sabbatical" and overdue camping trips with one of his two sons. His last day is Friday.

Ted Crone, retiring regional economist at the Federal Reserve Bank of Philadelphia, developed indexes of economic activity in each of the 50 states. The indexes show, for example, that economic cycles in Missouri and Pennsylvania closely track the nation's cycle as a whole - when the nation has slipped into a recession, so have these two states.

For more on the indexes, go to http://go.philly.com/Crone1.

Crone also researched the link between the quality of public schools and local home prices.

To read one of Crone's research papers on the topic, go to http://go.philly.com/Crone2.

- Bob Fernandez

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