After a brief summer hiatus spent writing about craft beer and economic development, the Latest in Economic Development returns to its normal, weekly posting. This week’s post focuses on port expansions, gambling and economic development, microlending, and mega-events.
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The eastern seaboard is engaged in a port arms race as cities like New York, Baltimore, Miami, Savannah, and Norfolk, Virginia expand their port infrastructure to accommodate planned “supersize container ships” coming through the expanded Panama Canal in 2015. According to The New York Times, “ this sense that the new set of locks now being built to allow giant ships throughout the canal will bring riches 1,000 miles or more to the north is shared by industry and government officials along the East Coast and the Gulf of Mexico, who have promoting multimillion – and in some cases multibillion dollar port projects for years.” Yet, with so many cities and ports competing for the same share of new traffic, there are concerns that the riches may not live up to expectations.
Maryland continues to push to expand its gambling avenues. The state passed legislation last week which, if approved by voters in November, transforms “Maryland in a few short years into one of the most concentrated casino markets outside Las Vegas,” writes The Washington Post. While supporters of the plan tout “the promise of thousands of new jobs and tens of millions of dollars in additional revenue flowing to the state and host counties…opponents have warned that Maryland risks an oversaturated gambling market.” Indeed, there are signs that while Maryland’s largest and newest casino is performing well, its smaller, older venue’s profits have plummeted. Further, nearby West Virginia officials also are “closely monitoring the situation” because of the potential “threat to the revenue stream for that area.”
Maryland isn’t alone, more states continue to turn to gambling as a budget solution and economic development generator writes Steven Malanga in The City JournalInterstate competition and empty state and local coffers are driving the interest as “states don’t want to be left behind as their neighbors institute more and more varieties of gambling” and thus take their potential share of tax revenue. Malanga warns that “gambling has often disappointed as a fiscal tool and a economic development strategy” as it competes for limited dollars “and the new gambling enterprises seem merely to be siphoning money from elsewhere in the economy instead of generating new economic activity.”
Microloans are in high demand from small businesses. According to the Federal Reserve Bank of New York’s Small Business Borrowers Poll, microloans (loans under $100,000) “are in the highest demand and are tougher to secure compared to larger loans.” The New York Fed lists challenges facing small businesses in securing these loans include “less-established firms, weaker sales performance, and infrequent banking relationships.” Further they found that firms seeking these microloans do so “to finance payroll, inventory and cash flow.”
According to the AP, Microloan programs are becoming more active in the U.S. Nationwide there has been a 25 percent increase in microloan distribution between 2008 and 2010 and “in cities like Miami, New York, Houston and Los Angeles, a small but growing group of mostly immigrant and minority entrepreneurs are turning to microfinancing.” Philadelphia small businesses will soon have a new source for microloans, through FINANYA, a CDFI. The effort’s funding will come from 6 major banks, a loan from the Small Business Administration, and a grant from the City of Philadelphia’s Commerce Department.
Do mega-events, like next week’s Republican Convention in Tampa, create the projected economic wealth for their host cities? According to Carl Bialik for The Wall Street Journal print and blog, it’s debatable ( for example, Tampa’s host committee is predicting an economic impact between $175 -$200 million). Questioning the validity of such projections, he cites that most economic impact studies are produced by the organizers or sponsors of the event; there is questionable legitimacy in counting event related government spending on security and transportation as “…those funds could have been spent elsewhere – or remained with taxpayers”, and the use of multiplier effects can over estimate the economic impact on the local economy. Yet, there may be some conditions where cities can benefit. For instance, if a mega-event is planned during a time of year not popular with tourists.