Better Communities through Cat Herding: the New Reality of Economic Development

By Alex Pearlstein, Principal, Vice President

Despite all exhortations to the contrary by people in and out of the business, economic development is still a pretty traditional enterprise. Many economic development organizations (EDOs) still focus most of their attention on external marketing and recruitment, despite that fact that, 1) the number one issue increasingly voiced by employers is a dearth of quality talent, 2) about 80 percent of jobs are created by a community’s existing businesses, and 3) prospect relocations of any size are few and far between these days. I think it stems from a “what will I do all day” mentality. If I don’t respond to RFIs, plan marketing missions, go to trade shows, and manage prospect solicitations and visits, what the heck will I do all day? It’s a valid question. 

My own philosophy is that economic development is essentially the development and marketing of a “product” and that product is the community. EDPros sell their communities, whether that’s to existing businesses considering expanding or relocating, external prospects, skilled talent, entrepreneurs, developers, investors, etc. Just like a business must focus energy on optimizing all aspects of its product, so too must an EDO. So that essentially runs the gamut of any element that affects a place’s competitive position. Education and training, quality of life and place, leadership capacity, diversity and inclusion, infrastructure of all types, entrepreneurial dynamism – you name it. So if economic development is product development and economic developers market those products, then it follows that they should be involved in championing, overseeing, coordinating, contributing to, and advocating for the optimization of the product. Therein lies the rub; you can’t define an occupation as “doing everything” because that person would end up doing essentially nothing. 

It’s probably more useful to think of an economic developer not so much in terms of a person but an entity – in fact, that IS the direction the industry is headed. An economic development entity should be comprised of professionals that work on product development concurrently with product marketing; the nation’s top EDOs do just that. Principally, they have staff dedicated to external marketing, internal retention and expansion, small business development and entrepreneurship, education and training, and policy and advocacy. If they do not directly implement programs in these buckets, then they have partnerships with organizations that do. However, there’s another role creeping into the most cutting-edge EDOs. For want of a better term, let’s call it “product development coordination.” Almost like a hybrid of a company’s HR and corporate strategy departments, this responsibility involves creating a vision, building a holistic network of partners to implement that vision, and then coordinating the multiple moving parts involved in activating and sustaining the vision. 

There’s a super-fancy new term for this process called “collective impact.” While collective impact is currently focused mostly on educational improvement or social services initiatives, I think it will increasingly nose its way into economic development. Why is that? Because the process is all about creating, leveraging, and sustaining effective partnerships to advance challenging efforts, and nothing is more challenging than the cat-herding responsibilities around community product optimization. Of Market Street’s client communities, the best existing example of a (to use the collective impact term) “backbone” organization shepherding a holistic regional strategic process is the Greater Des Moines Partnership’s Capital Crossroads initiative. What a recent mid-course review of the first strategic cycle told us was that economic development collective impact is hard, complicated, oftentimes frustrating, but ultimately rewarding work. Another takeaway was that an EDO needs full-time dedicated staff to effectively manage and coordinate a truly comprehensive, holistic, “product development,” collective impact initiative. So the Partnership hired a terrific staff person to administer strategic implementation. And, oh by the way, to even be in a position to herd the cats, the organization needs to be trusted and respected by the cats. Which the Partnership also had going for it. 

The other big issue facing EDOs in a changing world is one that cuts to their very core: resource development and demonstrating return on investment. Traditionally, ROI equaled job and investment growth and investors were typically companies that benefitted from corporate expansions or relocations: commercial and residential developers and brokers, banks, law firms, accounting firms, planning and engineering firms, etc. Companies that didn’t see business at the table wouldn’t feel the need to pull up a chair through investment in a multi-year economic development program. 

Unfortunately, this “pay to play” model doesn’t work so well in the collective impact economic development world. Nor do traditional ROI measurements of jobs and investment. To be successful in community product development, you need networked partners from all key local public, private, institutional, and civic constituencies. Many of these entities won’t have the resources to invest in building the capacity needed for an EDO to successfully staff its programs and new coordination role. So we’re talking about the need for some leaps of faith here from all potential partners with resources. This is critical because ROI for a holistic initiative must be equally holistic. We’re talking jobs, investment, poverty rates, educational attainment, young professional cohort percentages, high school graduation rates, crime rates – any metric that speaks to community product optimization. Without strategic investments made for more altruistic, community-serving purposes, EDOs simply won’t have the necessary capacity to be product developers/coordinators as well as marketers. 

I think that EDOs will increasingly embrace their collective impact roles and step up to the responsibility of cat herding in the name of better, more sustainable economies and communities for current and future generations. The alternative is the drying up of resource wells for traditional organizations that will have harder and harder times justifying current levels of investments for increasingly diminishing returns.

What happens in Reno hopefully won't stay in Reno

Ranada Robinson, Research Manager

Last week, I had the amazing opportunity to spend three days in Reno, Nevada with a stellar group of young urban professionals with a diverse range of areas of expertise from cities all over North America at the Vanguard Conference hosted by Next City. We explored, we networked, and we worked together to brainstorm creative ideas. I made many contacts, and I hope to keep in touch with them all. There are so many people dedicated to making communities better, and it was wonderful to spend time getting to know what we each do and think about various issues. Here are just a few of my favorite moments.

To get a real-time glimpse of my experience as a Vanguard in Reno, check out Market Street’s Twitter feed from May 6-8.

Tour of the Reno Post Office 

I enjoyed seeing the historic Reno Post Office because it reminded me much of Atlanta’s Ponce City Market. It’s an old government building that is currently undergoing a makeover and will be repurposed. When its transformation is complete, it will be called FiftySouth Virginia and will feature retail and office space while preserving and highlighting the most historical parts of the building. This building will likely bring much more foot traffic to the Riverwalk District. Exciting! 

Small Business and Entrepreneurship Tour 

We visited Startup Row and spoke with a few entrepreneurs in Reno. Startup Row began because entrepreneurs wanted to be around each other and figured out how to make it happen. The Reno Collective, a co-working space, and EDAWN, the economic development authority, have worked hard to create a supportive space for companies. Two really cool products that have come from their work are this infographic and the Reno Startup Deck, a deck of cards that feature all the contact information for resources and existing entrepreneurs to support new business owners. These are really great marketing tools, and the business owners we talked to are very happy to be growing their high-tech businesses in a gorgeous and up-and-coming place like Reno. 

Big Idea Challenge 

One of the major components of the conference was the Big Idea Challenge, a competition to come up with the best tactical urban intervention for three opportunity sites in downtown Reno. The winning ideas will be funded with a $10,000 implementation grant from the City of Reno and the Nightingale Foundation. On Thursday night, over 300 stakeholders in the city joined us as we presented our ideas at Cargo at Whitney Peak. The room was packed with people and energy. Before we arrived in Reno, we were divided into groups and assigned one of these opportunity sites. Then throughout the conference, we had time to look at the site, discuss our ideas, come to consensus, then develop a PowerPoint presentation. My team was charged with developing a proposal for the use of The Lids, also known as ReTRAC (the Reno Transportation Rail Access Corridor). The Lids are basically two concrete pads that cover depressed railroad tracks. The space is vacant and rarely used but in a great location downtown. 

My team consisted of (from left to right) Noah Silverman of the Reno Bike Project, yours truly, Theresa Hwang of the Skid Row Housing Trust in Los Angeles, Adam Meagher of the NYC Economic Development Corporation, Lora Lillard of the City of Portland Bureau of Planning and Sustainability, Michael Martin of HD MADE in New York, and Alen Amini of the Corps Member Education Foundation in Cincinnati.

We all agreed that we wanted to infuse public feedback as a main focus of our idea, and we wanted to leverage its historical use as an event space and/or vendor area. We then named ourselves All Aboard, Reno both for the tie to the train tracks that used to run through downtown Reno and for the citizen participation we were seeking to encourage. What we presented on Thursday night was a step by step process of engagement, starting with hiring a part-time Community Engagement Fellow with the $10,000; creating a Participation Station, a place to gather ideas for future events or space uses from the public, at an existing upcoming event (like the Reno Sculpture Fest this past weekend); engaging partners, particularly local businesses who could sponsor future events; and creating a feedback loop that included online and physical components. The point of our idea is that through a series of events bringing residents' dreams to life for a day, whether activities like yoga or community theater at The Lids or sample space uses like a skate park, the City would be able to observe which ideas were most popular, while giving a platform for local businesses to show what they have to offer. This method not only creates buy-in, but it connects citizens to that actual space and gives people a reason to venture to that area since it’s not currently heavil trafficked area. 

Although our idea didn’t win, we did receive tons of positive feedback from the city leaders in attendance and from our fellow Vanguards. So who knows? Maybe we’ll see our idea come to fruition one day, either in Reno or in some other place with a great vacant space.

Lake Tahoe 

Before my red-eye flight back to Atlanta, I joined a group of new friends on an hour-drive to Lake Tahoe for lunch. The place is simply breathtaking. We spent a couple of hours just talking about our favorite moments of the conference, talking about work and our communities, laughing, and just connecting. It was the perfect end to a very interesting trip!

Myeta Moon of Kaboom! in Washington DC, Ceara O'Leary of the Detroit Collaborative Design Center, Lakisha Hull of the City of Los Angeles Department of City Planning, moi, and my team member Theresa Hwang

 

Fasten Your Seatbelts – Driverless Cars are Coming

By Ryan Regan, Project Associate

I’ve been hearing a lot lately about self-driving cars. In March, a Delphi Automotive autonomous driving SUV completed a cross-country 3,500 mile trip from San Francisco to New York making it the first driverless vehicle to ever drive coast to coast. Supporters of the driverless vehicle allege that this invention will completely revolutionize just about every aspect of modern life, and after reading up on the topic, it’s hard for me to disagree. However, regulatory, ethical, and political issues that come along with the driverless car movement will be numerous, and it will be interesting to see how these issues are dealt with by skeptics and supporters alike. Regardless, their eventual adoption into our lives will change the way we approach everyday tasks, and that includes the way we approach community economic development. Below is just a sampling of the impacts expected from widespread driverless car usage, which are either directly or tangentially related to community economic development.

Whole industries will dissolve while others prosper: It is hard to quantify the number of industries that will be disrupted or fold entirely in a world populated by driverless vehicles. The auto insurance, auto finance, replacement car parts, trucking, oil and gas, and rental car industries are just a few of the industries that will be affected. However, with disruption comes opportunity. Ride sharing service companies like Uber will surge as they integrate driverless car fleets into their business models. Inter-industry linkage opportunities between the automotive manufacturing and information technology sectors will be abundant, and potentially result in new jobs in fields that don’t even exist yet. Logistics and utilities industries will see upticks in efficiency as many of these company’s operations become automated and less prone to human error. In fact, some mining companies are already using driverless trucks, a move that has resulted in greater operational efficiency, increased productivity, and safer working conditions in an industry that is notorious for its safety issues. 

Millions of workers will need to be retrained in new careers: In 2014, there were 4.1 million people employed nationally in motor vehicle operator positions. The widespread adoption of driverless cars will render many of these occupations obsolete, and thus, require a concerted effort at the community level to retrain workers with the job skills that a post-driverless car economy willdemand. Community colleges, technical schools, and other workforce development partners will be relied on to reequip these workers with competitive skill sets. The short-term unemployment challenges that this dynamic creates are daunting. However, the availability of new labor will benefit additional industries that are starved for workers. The key will be making sure that these workers with service industry and manufacturing backgrounds receive adequate job skills training in the STEM fields that are increasingly in demand in the national economy.  

Public safety benefits will be dramatic: Over 30,000 people die each year in the United States due to motor vehicle collisions, and car crashes are the primary cause of death of Americans between the ages of 15 and 24 years of age.[i] According to the Department of Transportation, there was an average of one alcohol-related driving fatality every 51 minutes in 2012.[ii] The proliferation of cell phones, especially among inexperienced teen drivers, has also created a budding public safety crisis for anyone driving in the 21^st Century. All of these difficult public safety realities would be erased by driverless cars. Up to this point, seatbelts, antilock brakes, and airbags have been the most important safety features to become commonplace in standard vehicles. Still, these inventions do little to solve the primary root cause of almost all accidents: human error. McKinsey & Co. released in March what is perhaps the most comprehensive study conducted to date on the benefits of autonomous vehicles. The study found that self-driving vehicles could eliminate 90 percent of all auto accidents in the United States, and save the country nearly $200 billion annually in costs associated with wrecked vehicles (mainly healthcare).  

Traffic congestion will fall and worker productivity will rise: One study by researchers at the University of Michigan Transportation Research Institute estimates that driverless vehicles could cut average household vehicle ownership rates by 43 percent, as families consolidate vehicle usage in favor of more efficient driverless cars that can operate independently with or without a passenger. Fewer vehicles on the road will in turn result in less traffic congestion. The average commuter in the United States spends 38 hours a year stuck in traffic, which equates to nearly a full work week. The previously mentioned McKinsey study estimates that commuters worldwide could shave off 50 minutes a day in a world where driverless cars are the norm. The resulting increase in labor productivity can help to spur innovation throughout the global economy. 

Spending potential for individuals, families, and small businesses will be freed up: Amazingly, cars sit unused about 90 percent of the time. When you calculate both the upfront costs and the long-term maintenance costs, they are a big financial burden for many individuals and families. Conventional cars reduce the disposable income that someone has to spend on other things, and they can wreak havoc on a credit score. Small business owners and entrepreneurs can be especially burdened by the debt associated with car ownership, since additional debt obligations represent just another hurdle to hiring people and purchasing capital. Reducing the financial costs associated with car ownership may help to usher in an era of unprecedented innovation, commodity spending, and small business growth. 

A potential game-changer in combating global warming: In 2013, greenhouse gas emissions from the transportation sector accounted for 27 percent of all greenhouse gas emissions in the United States. Passenger cars and light-duty trucks were responsible for over half of the emissions in the transportation sector. Reducing the number of these types of vehicles on the road will greatly reduce the carbon footprint of your average U.S. family. Driverless cars will predominantly be electric and far more fuel efficient than conventional hybrid or gasoline-powered cars, which are hampered by the clunky driving patterns of humans. In 2014, the United States consumed 136.78 billion gallons of gasoline, and there’s no telling how drastically that number could fall with widespread adoption of driverless cars. 

Urban renewal opportunities will alter our built environment: Driverless cars won’t have the same parking demands as a conventional car, and thus, parking lots and parking garages may soon become ancient relics just like pay phone booths. It is estimated that as much as 30 percent of the land in many urban cores in the United States is devoted to parking. Paved parking areas are eyesores that have unfortunately become the most recognizable feature of the built environment in metro areas around the world. They also increase runoff, which increases the threat of flooding and contributes to the contamination of our waterways. As parking lots and garages become obsolete, there will be tens of millions of square feet of prime real estate freed up in downtown areas across the United States. This will help pave the way (pun intended) for exciting community economic development opportunities. Imagine if every parking lot in the United States suddenly became either a public park, or a community hospital, or a small business incubator, or a new public school? The potential impact on residential development will be equally significant. Housing could become much more affordable once land that was formerly devoted to parking spaces is freed up for new residential development opportunities. On the flipside, driverless cars may exacerbate problems with suburban sprawl as people become comfortable living further away from urban jobs centers due to the reduction in commute time that driverless cars will afford them.  

Even in the most optimistic scenario, driverless cars are a few decades away from being widely adopted by the consumer market. What impact will driverless cars truly have on society? Nobody knows the full answer yet, but one thing is for certain – we won’t have to stand in line at the DMV to find out.

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[i] “Preparing a Nation for Autonomous Vehicles: Opportunities, Barriers and Policy Recommendations.” Eno Center for Transportation. October 2013: p. 3.

[ii] “Traffic Safety Facts: 2012 Data.” U.S. Department of Transportation: National Highway Traffic Safety Administration. December 2013: p. 1.

The New Face of Retail

By Evan D. Robertson

It’s an interesting time to be in economic development to say the least. Across the country metropolitan areas and states are implementing widely different policies to grow their economies, from developing innovation districts to drastically revising their tax code, it is my personal opinion that over the course of my lifetime (say another 50 to 60 years) we’ll finally get to see which economic development theories worked out and those that got left by the way side. Is a low tax environment the way to go? Or is heavily investing in research and development? Did the focus on entrepreneurs work out? Did those metro areas that heavily invested in talent attraction and quality of place outperform those metro areas that forewent that investment? And while we’ll have a better idea for what truly makes a local economy blossom, one question at the forefront of my mind will be: did any of these policies lead to equitable economic development? In our line of work, we tend to say a rising tide lifts all boats; however, recent research suggests that this rising tide may lift some boats much higher than others. To an extent, I wonder how much the economic development practices that we as economic and community development professionals espouse contribute to rising inequality. 

We in the economic development business, rightly, tailor our economic development recruiting, retention, and expansion practices to companies and businesses that will create high value jobs for our local community. At the core of these practices is economic base theory, which wholly advocates for the attraction, retention, and expansion of export-oriented companies. As the theory dictates, these newly created export oriented jobs will have the most impact on the regional economy, supporting additional jobs as the increase in economic activity ripples throughout the local economy. What economic base theory assumes and what we generally take for granted, is that export-oriented jobs will directly support growth in lower wage jobs. While these businesses range from consumer banking to legal services, it almost always includes retail. Put more simply, as we in the economic development profession support export oriented growth in our local economies, we are at the same time supporting growth in business sectors that are at the heart of our growing inequality. 

This isn’t, again, to admonish the profession for its proven practices of increasing the wealth and prosperity of our local community, but to say that as we heavily focus on attracting, retaining, and expanding export-oriented firms our attention is turned away from the simultaneous growth in lower wage employment sectors as our economy expands. We tend to place less emphasis on strategies that focus on local serving sectors, unless there is a distinct community need. If we assume the responsibility to support not only job growth and wealth creation but also economic inequality, then it may necessitate a shift in how we approach economic growth – it is as our CEO Mac Holladay often says a “both and” situation. Assuming we adopt economic inequality as the responsibility of the economic development professional, than it dictates that at the same time we focus on building our community’s export base, we must, at the same time, contribute attention to wage growth and wealth creation in our local serving sectors. How do we do that? Well, let me tell you about my new pair of running shoes.

Of the two big purchases I made in the month of April, I am particularly enamored with two: my new I-Phone 6 and a pair of Mizuno Wave Running Shoes. We’ll skip over the I-Phone since everyone, their mother, and their mother’s mother has written about how revolutionary Apple is to the retail sector. Instead, let’s focus on the shoes, or rather the company that sells the shoes: Atlanta-based Big Peach Running Co (BPRC). 

After walking past BPRC for the better part of a year, I decided to finally take the plunge and get a new pair. My experience can be summarized in four convenient, if lengthy, bullet points: 

1. Technology is key: Let’s face it despite the fact that technology surrounds us constantly, we are continually impressed by new technology. Technology in a retail situation can, and in my case did, influence the sale of merchandise. In terms of running shoes, the “fitting” process was technology driven – each step was equally amazing. The first part of the fitting process involved a machine reading the length of my foot, my arch, and the general distribution of my weight. This data was the sole driving force behind the shoes that I would later try on. At this step, the retail associate is going into great depth about my arch and my weight distribution, recommending shoes specific to my foot. The next step was to jog around a bit while a tablet device recorded the run. After the retail associate went into great detail about all this data: my arch, my stride, the angle at which my foot touched the ground, we were ready to try on some shoes. 

2. Deep product knowledge is a must: As I’m trying on shoes, the associate is going through each shoe with fantastic detail. How the shoe is made, how it supports the foot, a brief explanation of the company that makes them, where their headquarters is located. My entire selection choice hinged on two things: 1) the Wave Runner is made by a Japanese company headquarter here in Norcross, GA 2) the shoe’s support system wasn’t built using foam support in a typical running shoe, instead it uses a plastic plate that offers different (I’d argue better) support to the foot. Without this knowledge, I probably wouldn’t have cared at all about the selection process, and would have suffered significant sticker shock once I got to the cash register. But, combined with the whole technology-driven fitting process and the deep product knowledge, I wasn’t even thinking about price, nor did I care all that much when I made the purchase even though it ended up being about $40 dollars more than I expected. Key point: The value I derived from the technology and deep product knowledge significantly outweighed the actual cost of the item.

3. Build a Community: This is perhaps something Apple is best known for. The technology giant has created what Guy Kawasaki would call a culture of evangelism. Evangelism works so well because once one customer is hooked a particular product or service they will advocate on behalf of the product or service – it’s an influential, and more importantly, free version of advertising. BPRC embraces the evangelism part of retail; it is mindfully focused of creating a culture and community of seasoned and unseasoned runners and joggers. How do they accomplish this? Every Monday night they hold a Run Health Class, free and open to the public. It is a 45 minute workout that is focused on workout drills to improve core strength, flexibility, and balance. Along with the free Monday workout, they are a nexus of information to Atlanta’s running scene. In fact, the store has a huge binder filled with upcoming running events throughout the Atlanta area along with a calendar of upcoming events posted on the wall. Point being, after the purchase of my shoe I had absolutely no reason to come back until my shoes clocked around 400 to 500 miles. This equates to about a year, for another year I had absolutely no reason to walk into the store again unless I needed to return my shoes. Since my initial purchase, I’ve been back three times. These return visits increase the likelihood that I’ll buy something between now and when my shoes need to be replaced. 

4. Employee Investment is essential: I didn’t exactly witness this, but I imagine extensive employee training was behind my experience. Either way, the depth of knowledge about not only the product, but also every facet of the running from optimal body angle to how often your feet should be hitting the ground (about 180 steps per minute for those counting), demonstrated a degree of investment within the employee. It was clear the associate knew how to diagnosis a runner’s needs, operate the technology, and, most importantly, translate the results into the best shoe for the customer. This doesn’t happen in a void, the employee needs investment and empowerment. 

Businesses across the retail sector are making significant commitment to raising the wages they pay their employees. Wal-Mart just this year announced that it was raising the minimum wage it pays to its hourly employees, impacting 500,000 of its part and full time workers. As firms such as Wal-Mart raise their minimum wages, these efforts must continually be supported by higher customer satisfaction, raising same store sales, and increased consumer spending. Wal-Mart is making the investment in its workers, again this is a business decision, because it bets that it can get a return on this investment. An employee who simply points you in the direction of the product you’re looking doesn’t justify the increased labor costs. In order to support pay increases, and ongoing pay raises, it necessitates that the retail sector become staffed with empowered employees, one which leaves the customer with an immense degree of satisfaction. 

As we move forward with our economic development efforts, it is critical pay greater attention to the low wage sectors created by our attraction, retention, and expansion practices. We don’t necessarily need to solve the problem right away, but if we are to add the additional burden of income inequality to our workload, we must focus on creating high-value, high-wage service sector jobs. Small business support and development efforts are likely the frontline to these efforts along with the embrace of the new face of retail.

Is the incentives game about to change? New disclosure rules could radically alter how we think about tax breaks.

By Matt DeVeau, Project Manager

If you travel in community and economic development circles, you’re going to end up talking about tax incentives. It’s kind of our Godwin’s Law – if a discussion about economic development goes on for long enough, eventually someone is going to bring up the role of financial incentives to attract and retain corporate investment. These conversations typically take on a normative bent: incentives exist and you must have them to “remain in the game” but should this be the case? Who benefits? 

These are good discussions to have, but to this point, they’ve been built on limited data. At present, state and local governments have a wide range of reporting and transparency requirements related to how they distribute tax incentives. Putting together anything close to a comprehensive overview of the topic requires a laborious research effort. Getting information about even a single local project that received incentives may be difficult for an average citizen in some jurisdictions. 

But all of this may be changing soon. The Governmental Accounting Standards Board, an independent entity that sets financial reporting standards for most state and local governments, this past fall proposed a new rule that will essentially require governments to report the incentives they give to businesses in a uniform fashion. According to a recent analysis from the Pew Charitable Trusts, the new standards would require state and local governments to provide “descriptive information about tax abatement programs as part of their annual financial reports” for “as long as a tax abatement agreement remains in effect.” This descriptive information would include: 

· Purpose of the incentive. 

· Amount of revenue forgone during the financial reporting period. 

· Total number of incentives in effect and awarded during the financial reporting period. 

· Total commitments made by incentive recipients (such as job creation or capital investment). 

· Eligibility criteria. 

· Provisions for recapturing abated taxes, known as clawbacks (if any). 

· Statutory (or other) authority for reducing taxes and determining the incentive amount. 

· Other commitments made by the state or locality as part of the agreement. 

Note that the rule would not require local governments to identify individual recipients of incentives, and some popular incentive mechanisms such as tax increment financing (TIF) would not meet disclosure requirements. 

There is obviously a lot to unpack here, and the change is not yet final. According to the GASB, the rule still has a few hurdles to clear this summer, and proposed GASB rule changes have been known to come under attack in the past. If adopted, the rule would not take effect until 2017. But this could eventually lead to a radical shift in the way incentives are discussed and, more importantly, it could change who is involved in the discussion in the first place. 

Uniform reporting requirements would be a research goldmine. I’m envisioning better information about the effective tax rates in various jurisdictions and full-scale studies about the overall efficacy of tax incentives, to name two potentially exciting (well, to me) outcomes. But look again at that second bullet – “amount of revenue forgone during the disclosure period.” Presumably, this will allow policy makers and the general public to easily determine the value of incentives that their state or municipality has provided. More importantly, it will allow for easy comparisons across jurisdictions. It’s not hard to envision that leading to widespread discussions about the role of tax incentives and maybe even the broader corporate tax structure. In other words, economic developers could have a lot more company when discussing these issues in the future.

In Honor of April 15th: What the IRS can tell us about talent attraction and retention…

By Matthew Tarleton, Principal, Vice President

Whenever we are analyzing a community’s health and competitiveness, I am always drawn to some particular pieces of information that are provided by, of all places, the Internal Revenue Service (IRS). 

Surprise, surprise: the IRS knows a lot about you. When you file your taxes with residence in one county, then file taxes with residence in a different county the following year, the IRS deduces that you have likely moved. Not a great revelation. But this information is incredibly powerful. Not only can the IRS quantify how many households (estimated by the number of tax returns) and people (estimates by the number of exemptions) have moved into or out of a given county in a given year, they can also define where those people are coming from and where they are going. Once they scrub the data of all confidential information (you know, things like names, tax IDs, and social security numbers), we have the publicly-available IRS Migration Data Series that allows us to quantify the migration flows into and out of a county, region, or state on an annual basis. With the most recently-available data covering migration flows in 2011, the IRS data release schedule clearly lags a few years. Another surprise: the IRS has other priorities. 

We have used this data in many client communities to help understand their relative success in talent retention and attraction. There is no better measure of this success than the revealed preferences of actual people, and that is what the IRS data provides: an accurate measure of how people are “voting with their feet.” 

There has been a lot of coverage (here, here, here, etc.) in recent months about Atlanta potentially losing its edge in the competition for talent, particularly young, college-educated talent. Yet others claim that Atlanta has one of, if not the best value propositions to young college graduates. Although the IRS data does not provide information on the age and educational attainment of in-migrants and out-migrants, I wanted to see what the numbers had to say, and to see if I could detect any discernable change in migration patterns in the last couple of years of data – a time period (2009-2011) that aligns with the start of the nation’s economic recovery, and accordingly, renewed household mobility that is typically associated with job growth, enhanced financial security, a healthier housing market, and other factors. 

First, let’s provide some longer-term context. Between 2001 and 2011 (the most recently available ten-year period), net migration to the Atlanta metropolitan area (+453,377 net new residents) exceeded that of all other metropolitan areas in the country, except for the Riverside-San Bernardino-Ontario, CA metro area (+462,070). This level of net in-migration was considerably larger than what was experienced in many of other fast-growing Sun Belt metros like Phoenix (+355,367; #3), Dallas (+328,585; #4), Houston (+274,384; #5), Charlotte (+205,195; #8), and Austin (+182,667; #10). When expressed as a percentage of the region’s population in 2001, Metro Atlanta’s rate of net in-migration (10.3%) fell to 37th, surpassed by smaller, fast-growing communities that are common retiree destinations (think Florida, smaller metros in Arizona, etc.) but also significant competitors for young, educated talent like Raleigh. 

But I really wanted to see where these people were coming from, and of those that chose to leave, where they were going. And as mentioned, I also wanted to see if these trends had changed substantively in recent years. 

From 2001-2009, Metro Atlanta was a net attractor from the overwhelming majority of metro areas in the country (meaning that more people moved to Metro Atlanta from a given area than those moving from Metro Atlanta to that area). The region attracted tens of thousands of net new migrants from major metros such as New York (+69,138 net new residents; #1 in terms of most net new residents to Metro Atlanta) and Miami (41,110; #2). In other words, the region attracted over 110,000 more new residents from New York and Miami than it lost to these two regions in the eight year period. The region, like many others in the country, was a large net attractor of new residents the New Orleans metro as hundreds of thousands of residents were forced to flee the area in the wake of Hurricanes Katrina and Rita. The region was also a major net attractor of new residents from places that are commonly considered to be “talent rich” such as Boston (+6,595 net new residents; #7), Washington DC (+5,536; #10), the Bay Area of San Francisco (2,289; #25) and San Jose (+674; #72). Finally, the Metro Atlanta region was also successfully attracting more talent than it was losing from surrounding metro areas in Georgia and neighboring states; places like Columbus (GA), Augusta, Montgomery, Columbia, and Savannah. 

These are the places with which the Metro Atlanta region was winning the battle for talent during the early part of the new Millennium (2001-2009). What about the places to which we were losing the battle? Well, fortunately there were few. Out of the 34 metropolitan areas to which Metro Atlanta was a net loser of residents (net out-migration), nine were smaller metropolitan areas in Florida (again, retirees). Seven are metropolitan areas that we might typically consider to be places that we regularly compete with for either corporate investment or talent. Those seven metros in order of the level of net out-migration from Metro Atlanta are: Houston, Austin, Charlotte, Charleston, Denver, Phoenix, and Portland. Fortunately, net out-migration to these regions was relatively small (between -159 and -945 over the entire eight-year period). 

Not bad, Metro Atlanta. Not bad at all. 

But…always a but… 

Things changed in 2009. The economic recovery was more pronounced and rapid in many other parts of the country. Some great things happened (groundbreaking on the first trail segment of the BeltLine) and some not-so-great things happened (terrible flooding, the Atlanta Public Schools cheating scandal). There are countless other things we could add to these lists, and endless debate could be had regarding their impact on Metro Atlanta’s ability to attract and retain talent. But I just wanted to see what the numbers say. Did Atlanta lose its edge to some of these places with which we had recently been successfully competing for talent (both theirs and our own)? The short answer is yes. The long answer is yesssssssssssss. 

During 2010 and 2011, Metro Atlanta maintained its position as a net attractor of talent from numerous metros, but the size of that advantage shrank dramatically in many instances. From 2001-2009, the region attracted, on average, 8,642 more people from New York than the region lost to New York. Over the two year period spanning 2010 and 2011, that advantage fell to an annual average of 1,893 net new residents. Similar drops were observed in the flows from other major metros such as Miami and Chicago. In-migration from the Los Angeles, Boston, and San Diego metros dried up to nearly nothing (roughly net zero). 

But what is most concerning is the number of metros where the trends were totally reversed. Areas that were once major sources of net new talent for the Metro Atlanta region became net destinations for talent from the Metro Atlanta region. Where we once held an advantage in being a net importer of new residents – “talent rich” places such as Washington DC and the Bay Area (San Jose and San Francisco) – the region began exporting talent. Individuals and families started relocating (or returning) to New Orleans at a faster rate than they were coming (net loss of -1,029 residents in 2010 and 2011). 

Perhaps most surprisingly, Metro Atlanta started exporting residents to surrounding metropolitan areas in Georgia and neighboring states that have long been a source of talent for the region. This includes places like Columbus, Montgomery, Columbia, Warner-Robins, Chattanooga, and Huntsville (combined net loss of more than 3,600 over the two-year period). We also started being a net exporter to places like Raleigh and Nashville that we regularly compete with for new corporate investment, and were previously net sources of new residents. And the pace of pre-existing net out-migration to places such as Austin, Denver, and Portland has accelerated. 

But as anyone that resides in Metro Atlanta can tell you, the reality is that what we see on the ground in 2015 is quite different than what we observed in 2011. Much has changed and it is hard to deny that the region seems to feel like it is getting some of its pre-recession mojo back. Nonetheless, the data always brings some surprises. It will be important for our region to monitor the next wave of releases from the IRS. When that happens is anyone’s guess. I hear they’re busy this time of year.

Trees for A Better Economy

By Alexia Eanes, Operations Manager

As metropolitan areas continue to create places where people want to live, many are asking themselves: what are the selling points that will make someone relocate to their metro? Certainly jobs remain a critical factor, however, quality of life is increasingly important for highly mobile Millennials. We all generally understand the benefits a little greenery can have on a metro's quality of life. Almost everyone can enjoy green space: it allows us to break away from the daily grind of life. It's where people congregate, get healthy, have picnics, and socialize. But what is often overlooked, and arguably taken for granted, are the very things that green space is composed of: Trees. 

Trees are vital to a community’s wellbeing. Beyond beautifying and filtering our air, trees in urban areas have been shown to slow down traffic and strengthen public safety. One other beneficial gain that trees can produce is, surprisingly, increased economic activity. Studies have shown that shoppers respond positively to tree-lined shopping districts. Why? Well, one reason is that shoppers in tree-lined retail districts tend to have higher perceptions of the goods sold in those districts relative to other retail areas. You can just imagine a tree lined street in a quaint area with local boutiques selling artisan goods and clothes. It gives a certain aesthetic people are drawn to, and these areas become a retail focal point for the community and visitors alike. Both groups will go out of their way to get to the retail district and, while there, they spend money. Winter Park, FL, to me, is the quintessential tree lined street town where you want to shop and stay for dinner. While it does have a robust population, people from all over Florida and especially the city of Orlando travel there to experience what it has to offer. This doesn’t come naturally though. Their in-depth, award winning Parks and Recreation Department can be applauded for that. In 2014 the department received the Plant Operations Excellence Award from the Florida Department of Environmental Protection agency. Dually, they received the 2014 Achievement in Excellence in Procurement Award, which measures innovation, professionalism, e-procurement productivity, and leadership. The department successfully handles everything from trees on the street to farmers markets, event rentals in the area and much more.

Granted, there’s more to trees than their economic impact. Another benefit that may not be on your mind as an economic developer is the ability of trees to reduce the amount of heat being radiated from your city or town caused by man-made structures (typically referred to as the urban heat island). The temperatures that urban heat islands can generate cause major setbacks including hotter than normal temperatures, greenhouse gas emissions, and poor water and air quality. In a place with scorching summer temperatures, the city of Austin’s Community Tree Program is purposefully combatting this issue. The program chooses a neighborhood and has their volunteers plant up to 10 different native species of trees. The City has also partnered with TreeFolks in Central Texas to keep the initiative going. Their goal is to plant 350 15-gallon trees by March 2015. The increased tree canopy results in cooler temperatures (up to 10 degrees in some places) while also providing shade on the ground for people to enjoy. 

Other organizations throughout the nation are performing similar activities to reap the environmental and economic benefits for their own communities: Trees Atlanta, Keep Indianapolis Beautiful, and TreesCharlotte are just a few of these programs. While these metros are working toward their own goals, there’s no doubt that a little shrubbery can have an impact on their communities. 

Whether it’s boosting the economy, reducing your city’s heat island, or creating a community atmosphere, there’s a general consensus that green space and trees are not only a want but a necessity. There are programs and organizations all over the U.S. that are creating these features to benefit their hometowns. What is your program?