Thursday, March 29, 2012

Lessons Learned from McKesson’s Move from Memphis to Mississippi

By Matt Tarleton, Project Manager.

I am guilty of having an abnormal affinity for alliteration (see what I did there?), so let me apologize for the blog title in advance.

A few weeks ago, I wrote about Brunswick County, North Carolina and the heartbreak associated with finishing runner-up for two 1,400+ job projects. One of those projects, a Continental Tire facility, ultimately went to South Carolina due to the state’s unwillingness to grant comparable incentives. The second, a Caterpillar manufacturing plant, went to Athens, Georgia, as a result of proximity to Savannah’s deep water port, where further deepening will accommodate the larger post-Panamax cargo ships. While there are certainly other factors at play that contributed to the decisions of each prospect, these were the issues of greatest influence when it came down to deciding between the two sites (or at least that’s what executives have communicated). These were relatively large issues in the scheme of site selection – a roughly $35 million deviation in upfront cash incentives and a major infrastructure asset in the depth of a port’s channel. But as many practitioners know, the loss of a prospective company – or the loss of an existing business – can often come down to less concrete issues and seemingly smaller issues. While every loss is no doubt a painful reminder that somehow and somewhere, a community was able to demonstrate e that it was more competitive or more attractive to a certain business than you were, these losses can be valuable learning experiences if you can get honest feedback from the company.

This week an executive from McKesson shed light on a cumbersome process in Memphis-Shelby County, Tennessee that contributed greatly to the loss of roughly 800 jobs to Olive Branch, Mississippi in 2010. The Memphis Daily News reported this week that an executive from McKesson indicated that the inability of McKesson to qualify for a payment-in-lieu-of tax (PILOT) benefit for an investment that would not produce immediate job creation, as well as the requirement to produce a “diversity plan,” resulted in Memphis’ loss of a new logistics and supply chain headquarters to Olive Branch, Mississippi (just on the other side of the state line from Memphis). The PILOT program allows the Memphis-Shelby County Industrial Development Board (IDB) to take title to the property associated with the project, lease that property to the company/applicant, and receive payments-in-lieu of ad valorem taxes on the property, with payments typically set to a level that is some percentage of the taxes that would otherwise be due on the property prior to improvements. In addition to a variety of other criteria that must be met in order to be eligible for PILOT benefits, the IDB requires that each applicant develop a diversity plan demonstrating that a sufficient percentage of expenditures on labor, construction, professional services, etc. will support minority-owned enterprises, women-owned enterprises, local small business, and individuals seeking employment through area career centers.

This particular executive from McKesson was not exactly bashful in his comments this week regarding this process that took place in 2009 and 2010. Thankfully the leadership in Memphis-Shelby County spoke with representatives from McKesson shortly after losing the expansion project and immediately responded with changes to its PILOT program to better support retention of existing businesses. The new criteria allowed existing companies making a significant investment in property ($10 million or above) and employing at least 100 individuals in Memphis-Shelby County to be eligible for the PILOT incentive regardless of potential future job creation. McKesson would have qualified under this new criterion. But it was not just the lack of eligibility that frustrated McKesson; it was the process of navigating the eligibility criteria and attempting to communicate the value of its investment to the IDB in order to preserve jobs in Memphis that was described as “slow walk.” And although it was a tough loss for Memphis, the leadership listened and responded. Good coaches and players know that you can’t win them all. But they also know that you can learn from your mistakes through self-evaluation and attempt to correct those mistakes so you are in a better position to win the next time. Economic development practitioners should take a page form the Memphis playbook and do the same.

Thursday, March 22, 2012

Degrees of Snobbery

By Jonathan Miller, Project Associate.

Rick Santorum, in a criticism of President Obama’s push for universal access to higher education, was quoted as saying, “President Obama once said he wants everybody in America to go to college. What a snob.” Snobbery and elitism are not new barbs with which the right is now attacking the left, but in this case, it takes on a new connotation: college, in general, is a partisan issue. Fortunately, the bit played poorly with Santorum’s own party and Republican governors have come out in support of the President.

There is widespread acknowledgement that earning a college degree, whether in a technical college setting or a four year institution, provides a higher standard of living via increased wages. The following table shows median earnings based on terminal levels of education.

Median Earnings for Levels of Educational Attainment, 2010

Source: U.S. Census Bureau, American Community Survey

Not only do better educated workers earn more, but since 2000 median earnings have increased the most for those with higher degrees, while the least educated have seen little improvement. Further, unemployment rates during the Great Recession were much lower for those with bachelor’s degrees, peaking at 5.1 percent.

However, there has recently been a national examination of whether college is “worth it.” According to the College Board tuition and fees have increased 130 percent over the past 20 years. Median incomes have not kept up.

Median Income and Tuition, 1988-2008

Source: IRS and College Board via

Further complicating the issue is the rising amount of student debt. Some people have described it as a “bubble,” in which zealous “investors” (read students) are over valuing the returns on education and paying too much (see “Debt by Degrees” by James Surowiecki, The New Yorker).

So the question becomes, can we make college “worth it”? Either the marketplace needs to rain money on college graduates or college needs to become cheaper. If we suppose, for the moment, that labor market principles are unlikely to change in the near term, then we are realistically left with the second option: make college cheaper.

The state of Texas has made such a proposition reality (they apparently agree that economic principles are here to stay, for a time yet). At South by Southwest in Austin, TX, educators from Texas A&M announced that students, starting in the fall of 2012, will be able to earn a bachelor’s degree from Texas A&M-San Antonio in information technology with an emphasis on cybersecurity for $9,672. The degree is being made possible through collaboration between Texas A&M and Alamo Colleges, a community college system in San Antonio. Students enrolling in the program will earn dual course credit starting their junior year in high school, attend Alamo College for a year, and finish the final year at Texas A&M-San Antonio. Testing out of required classes via AP tests help lower the cost (AP and other dual credit classes are covered by the state of Texas education funding). Graduates of the program will be around the age of 20, hold a degree, and be qualified for jobs paying between $16 and $40 per hour.

The ability to offer a bachelor’s degree for under $10,000 was not the culmination of years of work, but rather the response of an educational system to a challenge put forth by Governor Rick Perry in his 2011 State of the State address. Plans for additional bachelor degrees under $10,000 in organizational leadership and business administration are already underway.

I think this is a game changer. Allowing students to obtain a degree in a field that will be growing for years to come, for under $10,000, is an incredible achievement. All of a sudden, students are able to access college cheaply and without spending additional years racking up debt and additional expenses.

If it’s possible in Texas, its possible anywhere.

Tuesday, March 20, 2012

Teach Your Children Well

By Kathy Young, Director of Operations.

Not long before I graduated from high school, an unexpected bestselling book was published titled An Incomplete Education. While I'm long overdue for a new edition (as are the authors, since the most recent update was in 2006), I still appreciate the book's ability to present concise explorations of a wide variety of topics without reading like straight encyclopedic reference set. Which, by the way, is soon to be history, at least in print form. If you are looking for an opportunity to start collecting out of print books, or if if your kids want to know what you used for school reports before Wikipedia, $1,395 will buy you a 2010, 32-volume encyclopedia set.

While the days of Encyclopedia Britannica in our school and family libraries may be gone, new developments that impact how we learn are always popping up. One of the most interesting in recent years is Khan Academy, a non-profit organization formed in 2006 with the goal of "changing education for the better by providing a free world-class education to anyone anywhere." If you haven't seen one of the 3,000 online video lessons available from the Khan Academy, a recent 60 Minutes story provides a quick intro. There's an interesting debate about how to integrate this form of teaching into the traditional classroom (if at all), and while I'm not ready for teachers to entirely cede instruction to Khan or others in the field, I'm thrilled that there are more choices for children and adults who have different learning styles, or can more easily incorporate "education on demand" into busy schedules.

The implications for community, workforce, and economic development practitioners are exciting, given the ever present need to offer affordable (or free!) continuing education and adult education and retraining opportunities. GED prep courses and financial literacy jump to mind, the latter already available for free via Khan Academy, and the former maybe a not too distant offering if enough requests are received (hint, hint).

As we often say at Market Street, you really can't overstate the importance of choices. This is true in education, and there are many community examples to cite that have seen the value of expanding the universe of learning opportunities. Whether its Decatur, Alabama where leaders are bringing the award-winning Leader in Me program to elementary schools, or one of the many communities that have pushed hard for career academies that offer dual enrollment, the quality of the educational environment can be tied to the choices that are available for students no matter where they are in life.

Friday, March 16, 2012

In the Trenches

By Matt Tester, Project Associate.

We talk about communities having to do more with less these days. Look no further than your local library to see what this looks like in practice. According to a March 2012 Pew report, “The Library in the City: Changing Demands and a Challenging Future,” local libraries are providing an ever-increasing range of functions to an increasingly demanding public – even while budget cuts threaten their ability to maintain current levels of service. By tracking trends in 15 urban library systems across the country, the report reveals the deep impact they have on our communities and demonstrates the challenge of surviving fiscal cuts without undermining recovery.

Two clear overall trends emerge from the research: library usage has increased since the onset of the recession; and libraries had reduced revenue, staff, and hours during the recession. Between 2005 and 2011, 10 of the 15 libraries saw an increase in library visits despite decreased weekly hours in all but two of them. Some experienced drastic increases in traffic – Detroit, Baltimore, Seattle, and Atlanta all increased by over 20 percent). All but one library (San Francisco) saw a decrease in revenue and all but two saw staff reductions. Most experienced double-digit revenue reductions, with Los Angeles’ 34 percent decrease being the worst.

Responses to these trends vary across cities, but in many cases libraries have moved aggressively to position themselves at the center of community engagement and support. In addition to serving the obvious mandate to provide information access (which, by the way, has merely undergone a total revolution in recent years), libraries are opening activity centers for teenagers, offering programming for children (and serving de facto childcare roles), adding more public-access computers, providing health information, and broadening access for special events and meetings. They are more and more engaged in front-line community and economic development work.

Meeting the needs of a needier public with fewer resources, all while adapting to the breakneck pace of technological change – it’s hard work. So, thank your local librarians. And then invite them to your economic development committee meeting.

Check out the full report here.

Thursday, March 8, 2012

Not in Kansas Anymore but Still Daydreaming about the Technology

By Ranada Robinson, Senior Research Associate.

Last week, my colleague Christa Tinsley Spaht and I traveled to the “Heart of America” to tour various sites that are major assets for the Joplin region, which encompasses seven counties in three states. The region, which is the focus of our most recent regional economic development strategy process,  has several impressive assets, but the one that made me feel like an excited school kid was the Kansas Technology Center (KTC) at Pittsburg State University in Pittsburg, KS. Although I’m in community and economic development now, I have had a passion for math and a little science since I was a small, so hearing about and seeing new technologies and students learning software such as AutoCAD made me take a welcomed trip down memory lane.

KTC opened in 1997 after three years of construction and is 278,700 square feet and holds about $26 million of equipment that students utilize. The state-of-the-art building holds space for over 15 undergraduate and graduate program areas in five departments:  automotive technology, construction management and construction engineering technologies, engineering technology, graphics and imaging technology, and technology and workforce learning.

Dr. Bruce Dallman, the Dean of the College of Technology, showed us several parts of the building along with the various labs, noting, of course, that it would take much much longer than we had to see everything KTC has to offer. We learned a little about plastic engineering and saw the many machines students use to learn how to produce various types of plastics, from hard materials that are used for piping and industrial products to everyday materials that are used to make water bottles. We saw the automotive technology labs that featured cars that students learn to diagnose and test and repair as well as the diesel labs. We also learned about technology that allows for magazines to place reader-specific ads in their publications instead of including the same ads for all copies, which is the norm currently, without slowing production. I felt smarter just by walking through the building, so I’m sure students who attend classes in KTC are really exposed to the newest technologies and developing products that people everywhere need or want.

One of the most impressive qualities of KTC is its established pipeline from classroom to workforce. The center has several partnerships with companies around the world because companies know that the graduates are well-equipped to join the workforce and become assets to their new employers. KTC is key tool for economic developers seeking to attract or assist in growing companies that need access to the type of training and apprenticeship programs that KTC offers. 

Tuesday, March 6, 2012

Score One for the Liberal Arts

By Stephanie Allen, Project Assistant. 

We spend a lot of time focusing on STEM education in economic development. We worry that as a nation, a state, a county, a community we’re falling behind our peers in STEM education so we create STEM focused programs for K-12 students. We lament the fact that fewer and fewer students are obtaining college degrees in STEM areas so we encourage our young adults to major in STEM areas and we tell them about all the job opportunities there will be for them with an engineering, mathematics, applied science, etc. degree.

You really don’t see economic developers suggesting the workforce might be better off with more training in philosophy, or history, or poetry, or dead languages. It’s not just economic developers that are focused on STEM areas either. It’s college chancellors, and the president, not to mention scores of parents, grandparents, aunts and uncles—if I had a nickel for every time someone asked what I was going to do with a philosophy degree…

Last month Daniel Jelski, a professor of chemistry and former dean of the School of Science and Engineering at SUNY New Platz, penned an article for the New Geographer that suggests maybe those humanities degrees aren’t so useless after all. In fact, the humanities may be better at helping students to develop and hone the skills Jelski sees as necessary for future employment.

Jelski lays out three laws for future employment: #1 People will get jobs doing things that computers can’t do, #2 A global market place will result in lower pay and fewer opportunities for many careers, #3 Professional people will more likely be freelancers and less likely to have a steady job. According to Jelski, there’s good reason to think there will be fewer STEM careers in the future as more and more jobs are computerized. That there are fewer electrical engineering majors today than there were 25 years ago doesn’t trouble Jelski because thanks to computers we need far fewer electrical engineers than we did 25 years ago. The same is true of chemists and mathematicians. Even computer scientists and programmers are not immune; many of the jobs done by programmers 25 years ago are now done by computers. While education in science, technology, engineering, and mathematics will always be important, Jelski suggests that education in the humanities might be equally good, if not better, for preparing people for jobs in the future.

In the future, Jelski predicts that as more and more people become freelancers, it isn’t credentials or simple job training that job-seekers will need, but rather self-generated expertise and abilities that can’t be replicated by computers (like empathy and compassion)—things which cannot be taught, but may be better nurtured with at least some education in the humanities, where students are more often encouraged to cultivate their general curiosity about the world, develop their own programs of study, and do more than just follow the directions to earn their credential.

Ultimately though Jelski thinks it isn’t what we study that will matter because it isn’t an education that we’ll need but rather a set of softer skills—skills that cannot be directly taught, but are nonetheless often developed in school. What Jelski doesn’t mention is that it is the development of these same skills that liberal arts college presidents and Montessori, Waldorf, and other alternative pedagogy school proponents have long touted as the most important parts of their educational strategies.

If Jelski’s right, it may mean that we should stop trying to play catch up when it comes to test scores in STEM areas and stop making the focus of education the ability to memorize formulas and follow directions. It may mean we should start instead to try and get ahead of the game by following the lead of Montessori, Waldorf, and liberal arts schools and turn our focus toward teaching our children how to learn, how to love learning, how to think for themselves, and how to care about and respect each other.