Latest in Economic Development

This week’s latest in economic development focuses on FDI, some state-level incentive mishaps, small business confidence, worker skill mismatch, and Creative Class 2.0. Have things to add, contact me at mcconnell@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

Cities look to attract more foreign direct investment.  Toledo, Ohio, which has been courting Chinese investment for the past couple years, is working on a regional effort to bring together 200 foreign investors, mainly from China, with 200 business leaders and economic development officials from 17 counties in Northwest Ohio and Southwest Michigan for a 3-day investment centered forum (via Economic News From Ohio’s Regions).

In Denver, a meeting between foreign-owned companies and local economic development officials produced five suggestions on how the region could be more adept at FDI: “Help for executives to better integrate themselves in the community; the addition of more direct international flights from Colorado airports; the reliability and accessibility of energy resources; improvement for infrastructure for product transportation; and a stable tax and regulatory environment.”

The Creative Class turns ten and to celebrate, it’s getting a pony revised edition! It’s been ten year’s since Richard Florida’s still controversial book Rise of the Creative Class was released and the revised edition, which now reflects Florida’s “ideal vision of the future” in which all jobs are “creatified, hit the shelves this week. And while no doubt there will be plenty of controversy and reactions in the urban planning realm in the coming weeks, in the meantime, if you want to check out the revised edition, excerpts can be found  here, here, and here.

Economic development incentives are often controversial and shrouded in secrecy, however, Floridians are getting a glimpse of the state’s economic development incentives, as 80 deals that were under confidentiality agreements were mistakenly released.  While Wisconsin, on the backs of criticism about a premature incentive commitment during an open bid process, is pledging new safeguards.

 One-third of surveyed small businesses report they will look for financing in the next six months according to a new survey by Pepperdine University and Dunn and Bradstreet Creditability Corp. Not surprisingly, however, those small businesses with revenues between $5 million and $100 million expressed more optimism than those under $5 million in their ability to secure a loan.

Massachusetts, with the Federal Reserve Bank of Boston, is conducting an in-depth study of its workforce. The efforts’ first report found that “Despite higher unemployment among young workers in Metro South/West, young workers don’t seem to be moving into jobs being vacated by retiring baby boomers, stoking fears of a mismatch between the skills that younger workers are learning in schools, community colleges, and universities and the qualifications needed by employers.” Detroit top tech companies begin a pilot program to train workers. Facing a shortage of skilled IT workers, for example 368 open tech positions at Quicken Loans, four of Detroit’s tech companies, in partnership with local universities, have launched a training program “to help students transition between the classroom and the workplace.”

Can’t Leave Now

The following post was written by Jim Brooks – Program Director at the National League of Cities.

 

For the makers of the film DETROPIA, Heidi Ewing and Rachel Grady, the first priority is to contextualize a set of problems and move an audience toward understanding. Furthermore, their hope is to make the complex challenges of globalization, race relations, urban decay and the disconnections between citizens and government more approachable.

 

It’s a big task for any film. But, if the post-screening discussion at the Silver Docs film festival is any indication, the creators have achieved this first goal. The film informs, engages, provokes, challenges and inspires.

 

The focus is Detroit but the images and experiences have played out and are playing out in any number of urban centers around the country. The stories portrayed have broad applicability.

 

People ask if the film is an overture for or a eulogy to Detroit. I choose to think of the film as a requiem – an acknowledgement of what has been lost and a reminder of the durability of the spirit that may come forth again. Indeed, cities experience rebirth with startling regularity. It may take a generation of transformation, but cities have proven to be resilient. New York, Chattanooga and Pittsburgh are among the good examples of revitalization.

 

The film for all its grit and desolation gives the viewer cause for hope and optimism. The influx of young artists and knowledge economy workers is an established fact. Philanthropies and entrepreneurs have literally poured millions into Detroit seeking to catalyze change and jump start entrepreneurship. Even the big three U.S. auto makers are returning to profitability after the federal bailout.

 

But what really matters is the wit, faith and a clear-eyed judgment of the film’s leading personalities. Amidst the turmoil and poverty and helplessness, Crystal, Tommy and George leave me optimistic. Crystal sums it up best in her whisper of a comment, “Can’t leave now,” she says. “Can’t *****ing leave now.”

 

They are the civic voice in Detroit that is demanding a say both in the assessment of the city’s problems and in the crafting of solutions. They represent that undefinable aspect of humanity in cities who have adopted Winston Churchill as their patron saint.  His words are their motto, “never flinch, never weary, never despair.”

Latest in Economic Development

This week’s Latest in Economic Development highlights challenges with worker training, New York’s economic diversity, New Orleans’s mini tech boom, and trends in economic attraction.  Have things to add, contact me at mcconnell@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

Public universities are not sufficiently preparing students to enter the workforce, according  to a new report by the Institute for a Competitive Workforce, an affiliate of the U.S. Chamber of Commerce. Margaret Spellings, former secretary of education and head of the Institute,  suggests that improvements should include expanding access to online courses, associates degrees, and other forms of alternative education. (Tennessean via Governing).

U.S. companies are increasingly looking to Germany’s worker training model writes Vanessa Fuhrmans in the Wall Street Journal.“In Germany, nearly two-thirds of the country’s workforce are trained through partnerships among companies, technical schools and trade guilds.” In the U.S., such partnerships are rare and companies worry about investing in individuals only to have the leave for a competitor. But more U.S. companies and government officials are examining the viability of the German model after exposure to examples here in the U.S. like the apprentice programs at Volkswagen’s Chattanooga, Tenn. plant or Siemens in Charlotte, NC.

Anything new in economic attraction? Asks NLC’s Christiana McFarland. Business attraction has always been viewed as an essential part of economic development and while the strategies may have not changed, the environment in which they play out has.  The internet is more important, especially the need to provide timely, accurate, and easily accessible information online. And fiscal pressures are increasing the calls for accountability and transparency, shrinking economic development funds, and at the same time, raising the demand for immediate, visible results.

New Orleans has been experiencing a “Mini Tech Boom” with a 19 percent growth in tech jobs since 2005 (compared to 3 percent nation-wide).  State tax-credits directed at digital media and software firms are being credited with catalyzing the growth. The tech growth is a only a fraction of Louisiana’s overall economic growth, which is mostly due to its traditional industries (oil, gas, and tourism) and New Orleans still has crime and infrastructure challenges that it will likely need to overcome. But at the same time, the city has experienced growth in its educated workforce population and is increasingly viewed as a legitimate location for tech companies (via Southern Compass).

New York needs economic diversity, writes Edward Glaser in City Journal as he warns that the city has become too dependent on the financial industry. And while the city shouldn’t try to hold Wall Street back, it shouldn’t put all its eggs in the volatile finance basket. Glaser gives kudos to the city’s efforts already underway including the planned applied science campus on Roosevelt Island as well as the city’s new Business Acceleration Team, but writes there are still challenges facing start-ups.

Supreme Court Casino Case: Win, Loss, or Draw for Cities?

If you gamble at a casino there is no question whether you have won or lost.  Nevertheless in a recent Supreme Court case affecting cities, involving land to be used for a casino, victory or defeat…depends.

The U.S. Supreme Court recently held in Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak that the United States can be sued for acquiring land per the Indian Reorganization Act.  And a private citizen who lives near the acquired land has “standing” to bring the lawsuit.

Section 465 of the Indian Reorganization Act (IRA) allows the Secretary of the Interior to acquire property “for the purpose of providing lands for Indians.”  The Secretary acquired land for the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians to open a casino. David Patchak lives near that land and sued the Secretary claiming the she lacked authority to take title to the land because Band wasn’t a federally recognized tribe in 1934 when the IRA was enacted.  Patchak also alleged economic, environmental, and aesthetic harm from the casino.

The tribe claimed that the United States has sovereign immunity from this lawsuit per the Quiet Title Act.  The Court rejected this argument noting that Patchak wasn’t claiming title to the acquired land as required by the Quiet Title Act.  The tribe also claimed that Patchak had no “standing” to bring a lawsuit in this case because his economic, environmental, and aesthetic interests focus on land use while §465 focuses on land acquisition.  The Court again disagreed noting Secretary of the Interior takes title to property keeping in mind how the tribe will use the land.

It may not appear that this case has anything to do with cities because it involves a dispute between a private citizen and the United States.  However, in one of three similar cases cited by the Supreme Court, the City of Tampa was suing over a tract of land in trust for the Seminole Indians.  Also local government where this casino is to be located filed an amicus brief in favor of the tribe in this case.

Do local cities benefit from a ruling in this case?  That depends.  To the extent cities want to bring actions under §465 this case is a win.  However, to the extent private citizens bring §465 claims and cities (as in this case) don’t like the position a private citizen is taking in a case, this case is a loss.  Regarding standing, the D.C. Circuit indicated that the authority of state and local government to bring §465 claims is clear.  To the extent private citizens may now have standing to bring §465 claims this may be to the advantage or disadvantage of cities depending on whether they agrees  or disagrees with the private citizen’s position.

Speech and Sewers: The Supreme Court has been Busy Ruling in Favor of Local Government

The last week of June likely will be big even for Americans who generally don’t give a second thought to the U.S.  Supreme Court because the Affordable Care Act cases and the Arizona immigration case will be decided then.

But for at least local government and the State and Local Legal Center (SLLC) the first week of June was exciting!  The Supreme Court issued opinions in two cases where the SLLC filed an amicus brief:  Armour v. Indianapolis and Reichle v. Howards.  Remarkably, the SLLC’s brief was cited in Armour v. Indianapolis.  ICMA signed onto the SLLC’s brief in both cases.

In Armour v. Indianapolis  the Court held 6-3 that Indianapolis didn’t violate the Equal Protection Clause of the U.S. Constitution when it forgave the debt of those who choose to pay for sewer upgrades in installments but didn’t issue refunds to those who paid for sewer upgrades in a lump sum.   The Court concluded Indianapolis had a rational basis for this decision, which was made after Indianapolis changed its method of funding sewer upgrades–namely avoiding the administrative inconvenience of having to continue to collect monthly payments as low as $25/month for as long as 30 years for a discontinued program.  Justice Breyer cited the SLLC’s brief which described exactly what Indianapolis would have to do to keep collecting installment payments and what it might cost.

Why is this case so great for local government?  Lyle Denniston of SCOTUS blog says it best describing the opinion as “full of admonitions against courts’ second-guessing of state and local tax policy.”

In a unanimous decision in Reichle v. Howards, the Court granted qualified immunity to two Secret Service agents, who allegedly arrested Mr. Howards for speech to VP Dick Cheney, where the agents had probable cause to arrest Mr. Howards for committing a federal crime (lying to them).

I am sure you can only imagine what happened in this case…

Mr. Howards told the Vice President his “policies in Iraq are disgusting” and then touched him.  When a Secret Service agent questioned Mr. Howards about assaulting or touching the Vice President he denied it and was arrested.  Making a materially false statement to a federal official violates a federal statute.

Mr. Howards sued the agents claiming they violated his First Amendment rights by arresting him in retaliation for his speech.  Government official are immune from lawsuits claiming they have violated someone’s constitutional or statutory rights if the law violated wasn’t “clearly established.”

According to the Court it was not “clearly established” at the time of the arrest that an arrest supported by probable cause could violate the First Amendment.  Justice Thomas, writing for the Court, noted that the Supreme Court has never held that a person has a First Amendment right to be free from a retaliatory arrest supported by probable cause.

This case is a win so why is it also a disappointment?  The Court accepted, but declined to decide, the underlying legal issue in this case:  whether probable cause bars First Amendment retaliatory arrest claims.  Why?  I think Mike Dorf of Dorf on Law has it right.  The decision about qualified immunity was unanimous so they decided to leave well enough alone.

To learn more about these cases and the other big cases from the term, sign up here for the SLLC’s FREE Supreme Court webinar on July 19 which will cover these cases and all the other prominent case from the Supreme Court’s October 2011 term affecting state and local government.  Speakers are Paul Clement who argued Armour v. Indianapolis (and the Affordable Care Act cases and the Arizona immigration case…) and Patricia Millett who has currently argued more cases before the Supreme Court than any other woman.

The Latest in Economic Development

This week’s Latest in Economic Development highlights unnecessary business licenses, looks at U.S. manufacturing, and skilled worker shortages.  Have things to add, contact me at mcconnell@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

While there is lots of excitement about the “re-shoring” of jobs by companies like Starbucks, the state and future of U.S. manufacturing is far from simple. Chinese labor is growing more expensive and U.S. based operations offer product and logistical advantages. However, according to Harvard Business School Professor Gary P. Pisano, the U.S. has not seen wide spread resurgence of the type of  innovative manufacturing process that produces  long term benefits : “What we need to see is manufacturing that creates new capabilities here that we didn’t have and can build on, and I don’t think we’re seeing that yet.”  (New York Times). However, there are more positive signs. There has been an uptick in small manufacturers purchasing expensive, high tech machinery – a sign that small manufacturers are more confident about their future.  These investments help U.S. manufacturer produce sophisticated and specialized projects which may help them have a leg-up on foreign competition.(U.S. News)

The mismatch between worker skills and employer needs are driving collaboration between private sector and universities. According to Craig Torres and Steve Mathews in Bloomberg, “[Companies] are reaching into colleges to make contact with students far earlier than they ever have. Their involvement extends to advising and shaping curricula so graduates can plug into jobs faster with less training time and costs.”  While some have concerns that students get less of the theoretical underpinnings of traditional academia, students have the advantage of likely job offers upon graduation.

Entrepreneurs and small businesses are suffering under the yoke of too many licenses writes NPR’s Jacob Goldstein in the New York Times. There are more than 1,000 licensed professions in the United States a result of a system initially designed to protect the social welfare of the public which, over time, has turned into a self-perpetuating legal framework promoted by professional groups. And while those already licensed support and defend the system, licensing requirements create timely and expensive barriers (for example two years and 16,000 dollars to become a hair braider in Utah) to individuals trying to enter new fields –  including laid off workers or military spouses who change states frequently (a cause championed by Michelle Obama). This is consistent with last month’s Kauffman Foundation and Thumbtack.com survey of small businesses who  reported license requirements as twice as important as tax-related regulations in determining their state or city government’s overall business-friendliness.


Anything New in Economic Attraction?

Business attraction has been and continues to be an essential part of economic development for many communities. In the context of difficult political, economic and fiscal realities, have economic attraction strategies changed?  I put this question to a group of economic development professionals on the networking site LinkedIn. Surprisingly, most noted that although recruitment strategies themselves haven’t changed much, the environment in which they play out certainly has…and is impacting everything from the use of the Internet to political leadership.  Here’s some of what they said:

Information
The Internet and wealth of easily accessible data has truly changed the way communities interact with prospective businesses.  Often, these businesses do their homework and profile the city based on data and information available online long before meeting with the community. City leaders need to be constantly aware of what’s out there and also know how to use the Internet and social media to their advantage to market specific and realistic assets and opportunities in their community.  Keys to success: provide as much information and accurate data as possible, present them in a timely and clear manner, and review them regularly.

Local Assets
The current economic climate has many communities clamoring for jobs, and in some cases, any jobs or businesses in “fad” sectors.  Targeted recruitment strategies that instead leverage the community’s existing advantages provide clear parameters for the types of industries or businesses that will thrive in the community.  Be wary: consultants can sometimes push communities in directions that are not compatible with existing strengths or industry advantages.

Accountability
Fiscal pressures are prompting community residents to expect greater transparency and accountability from their elected officials in the use of public funds for business attraction. As a result, communities are increasingly using analytics and accountability measures to ensure a return on investment.

Politics
For many communities, fiscal challenges are also resulting in less funding for economic development, but with greater expectations from elected officials.  This can break the continuum of leadership needed for those initiatives that would sustain the community in the long-term in favor of those that provide more visible and immediate results.

Other recruitment trends that we’ve noticed in our work with cities and interactions with economic development professionals are:

  • Targeting smaller, high growth businesses and entrepreneurs;
  • Exploring foreign investors as sources of capital, development partners and new business prospects;
  • Using different types of incentives and a variety of funding sources in creative ways; and
  • Marketing on a region-wide basis.

In the coming months NLC’s Center for Research and Innovation will be taking a closer look at these trends and the implications for local leadership. What’s new in economic attraction in your community?

Untying the Knot of Incarceration, Part 2

Federal Policy:  Where we are, and ways forward
This is the second in a two-part series on incarceration and its impact.

As national arguments continue over the cost of government at all levels, one area where reform could mean tens of billions of dollars in savings is not receiving a great deal of attention: incarceration.  Proven practices show that shuffling the tools we utilize in our criminal justice system can achieve more efficient and effective public safety, more productive citizens, and safer neighborhoods.  What stands in our way are years of politics and volumes of policy at all levels of government.  This post explores how the federal government is working with localities to implement common-sense reforms, as well as Senator Jim Webb’s (D-VA) efforts to implement a comprehensive review of our nation’s criminal justice system by passing the National Criminal Justice Commission Act (S. 306).

As discussed in the first blog post on this topic, while incarceration will always be part of our crime fighting formula, it fails at creating lasting change.  Two-thirds of those released from prisons were rearrested within 3 years, meaning the vast majority of those that are leaving incarceration are likely to recommit.  With the yearly cost to lock someone up more than sending someone to college, it is also one of the most expensive criminal justice tools—and one we are very quick to utilize.

It surprises most people to hear that the United States of America has the highest incarceration rate in the world.  Although our country has less than 5 percent of the world’s population, we house a quarter of the world’s prisoners.  Despite crime taking a consistently downward trend since the early 1990s, incarceration continues to rise dramatically.  Today, our jail and prison population stands at about 240 percent of what it was in 1980.

We know it is far less costly for everyone if we can stop a crime before it happens: prisons, police, taxpayers, and even apprehended criminals save time and money.  That is why preventing crime rather than simply responding to it has become the hallmark of modern community policing techniques.  This methodology has become increasingly possible through utilizing data to anticipate and prevent crime, as well as new methods for identifying those at-risk of offending (or re-offending) and providing a new path forward.

After the jump: where we are going, federal support for local programs, and why Senator Webb’s fight to create a common path forward is so important.

Read More

Broadband in the United States

It isn’t new news that the United States lags in broadband adoption and download speeds.  The United States was one of the world leaders on broadband penetration in the 1990s, ranking fourth among other developed and developing nations.  But by 2006, the U.S.’s standing slipped drastically, according to the Organization for Economic Co-Operation and Development, indicating a lack of leadership on broadband development on a variety of levels.

Broadband, which is used by private citizens, local governments and the private sector every day, has the ability to transform the way we communicate, work, learn and socialize.  Many experts believe that much of the economic growth that has taken place in recent years has resulted from the use of broadband networks to improve productivity, provide better products and services and support innovation in all industries.  Better access also defines our competitive edge in the world by how many of our citizens have universal and affordable access to broadband services.

The Federal Communications Commission defines broadband access as speeds ranging from as low as 200 kilobits per second (kbps), or 200,000 bits per second, to 30 megabits per second (Mbps), or 30,000,000 bits per second.  However, a report of countries with the fastest internet speeds shows that the average speed in the U.S. is about 616 kbps; drastically slower than in South Korea, which topped the list at an average of 2,202 kbps.  For the end user like you and me, it means there is a greater chance that your favorite Netflix, Youtube, or Hulu video will crash while you are watching it here in this country.  But there are also broader, national concerns.  Without a higher standard for broadband connection and more investment in it, this country is at a disadvantage when it comes to competing internationally in the development and provision of services delivered over broadband networks.

One of the biggest challenges with broadband access is that it isn’t universally available to all parts of the country.  Providing service to less populated areas can prove to be unprofitable for the private sector, making access uneven and spotty.  “The big carriers have stopped investing in next-generation networks, leaving communities with few options but to consider their own investments.” says Christopher Mitchell, Director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance.  The flipside to this argument, though, is that access doesn’t always imply usage.  There is a lack of understanding of how broadband access can truly impact a person’s day to day life, from something as small as paying a bill online versus mailing a check in to opening doors up for on-line education when local options are not available.

Revisit CitiesSpeak in the weeks to come for a more in-depth look at technology and broadband issues as they play out in fields of education, health care, transportation and finance.

Latest in Economic Development

This week’s blog explores connecting skills to industry needs, up and coming entrepreneurial hot-spots, and the proliferation of incubators and accelerators. Comment below or send to mcfarland@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

Both booming cities and struggling towns are reexamining the linkages between industry and skills development as a gateway to growth.  Although Seattle tends to be on the receiving end of a highly-educated workforce, business leaders in the region note a significant leak in the workforce pipeline.  To meet the increasing demands of local businesses, like Boeing, education leaders and the state legislature recently committed funding to increase enrollment in engineering and technology degree programs, reports the Seattle Times (via Seattle’s Daily Digest).

Places like Dayton, OH, that are on the other side of the attainment gap and are struggling to employ displaced manufacturing workers, are “racing to produce, attract, and retain college graduates as badly needed food for its hungry economy,” reports the New York Times. Through internship programs and restructured “bundles of courses” at local community colleges, Dayton is hoping to retrain and retain its workforce.

Still left for debate, though, is the economic impact and value of certificate programs and two-year technical degrees vs. more traditional four-year college degrees. The more traditional route is thought to have a greater impact, but places like Walla Walla, WA, which transformed its economy into a flourishing wine region, are proving that with strong industry input and reliance on local assets, community colleges can be serious partners for long-term growth and private sector investment, details National Journal.

New Orleans and Pittsburgh are on their way to becoming flourishing start-up havens, and attribute much of their early success to structural changes in the economy.  In New Orleans, “its narrative is embedded in the lore of the city’s post-Katrina recovery: bright newcomers join with returning New Orleanians and newly determined natives to build a new, progressive business culture open to risk and innovation,” blogs Bruce Nolan of the Times-Picayune. In both cities, early stage investors are helping to commercialize ideas, and accelerators, like Pittsburgh’s Innovation Works’ AlphaLab program, are seen as essential to providing the investment capital, office space, mentoring services and a density of talent needed for a thriving entrepreneurial ecosystem.

But accelerator and incubator programs have come under fire recently. Wall Street Journal notes that critics “question whether some of the programs- particularly newer ones outside tech hubs like Silicon Valley, Boston and New York- have enough access to the right mentors and investors to boost an entrepreneur’s chances of success.”  And even if the program is robust, “incubators tend to look for very specific business models- start-ups that can grow quickly and offer a major return on investment…so if you’re doing something particularly new, you may not be able to get into an incubator even with a truly great idea,” notes Thursday Bram of ReadWriteWeb.

The proliferation of incubators and accelerators may leave entrepreneurs and cities alike wondering whether they need these programs to be successful.  Their effectiveness may be hard to measure since many are new, but on the flip-side, strategies such as streamlining business regulations like in Manchester, NH, or holding community conversations between the Mayor and start-up companies like in Seattle, are certainly time-tested ways to support local growth.