Economic Development Thoughts

Greetings. I'm Alex Stall, an economic development professional based in Kansas City and I work projects all over the country. This blog was created to post articles and insights on what is happening in the economic development industry. These views are my own and do not necessarily reflect the views of my employer.

[econdev]

Update on GreenTech

A year later, I thought it would be good to do an update on GreenTech Automotive in Mississippi. GreenTech has merged with another automotive startup called VL Automotive and the plant was supposed to be completed in late July. I didn't see any new articles discussing the plant, so I can't say whether the plant is actually finished.

Read more about the company and their plans at the link below.

[econdev]

What to Avoid When Offering Incentives

Project incentives are such a hot topic and it seems everyone has an opinion on them. It is important to recognize that most incentives use some sort of taxpayer money or abatement of taxes. Therefore it is crucial to be transparent on the use of the incentives.

Buxton recently posted an article about the Five Deadly Sins of Providing Incentives.

Sin #1 – Not Defining Public Purpose and Eligibility Criteria

Sin #2 – Not Doing Due Diligence

I think Buxton did a good job capturing some of the considerations a community makes when offering incentives. Read the rest of the article at the link below.

[econdev]

A Tipless Restaurant?

I read with fascination the concept of abolishing tips at a restaurant. It's not really what you think and from what I read, seems to be a worthwhile idea.

A couple of years after opening the Linkery restaurant in San Diego, the team and I adopted a policy of adding to each dining-in check a service charge of 18 percent—a little less than our tip average had been.

This really isn't much different from other industries and service improved.

When we switched from tipping to a service charge, our food improved, probably because our cooks were being paid more and didn't feel taken for granted. In turn, business improved, and within a couple of months, our server team was making more money than it had under the tipped system. The quality of our service also improved.

I doubt we see other restaurants eliminate tipping anytime soon but it is a worthwhile consideration.

[econdev]

Rail and economic development

I know we all hate sitting at a rail crossing for several minutes to wait for that freight train to pass by. But from an economic development view, rail is invaluable for many companies and can be a project driver. Every freight car I see tumbling down the track is pure commerce and money. There isn't anything like rail and the impact is huge.

I pulled some numbers about rail and the economic development opportunities it creates.

The U.S. Department of Transportation forecasts demand will rise 88% by 2035 from 2002 levels.

Every $1 invested in rail systems (track, locomotives, bridges, etc.) returns $3 to the American economy, according to the U.S. Department of Commerce. That's a 200% return on investment.

Collectively, the rail activity in the Corridors support over 162,000 jobs. One direct freight rail job supports another 4.5 jobs in factories, power plants, distribution centers and other businesses served by rail. The ripple effect of job creation continues throughout the economy.

Read more about how important rail is to economic development at the link below.

[econdev]

How the public sector can help the private sector

I came across this article featuring Valparaiso, Indiana, a small town close to Chicago. Evidently their downtown was really struggling ten years ago.

"There was a point when we had a 30 to 40 percent vacancy rate in the downtown," former councilman Chuck Williams said.

Williams is credited with the idea of making the city a dining destination by creating the special low-cost liquor licenses. The Indiana State Legislature granted 10 special downtown historical district liquor licenses to the city in 2005. Now the downtown area is full of restaurants, shops and businesses. It's complete revitalized Downtown Valparaiso.

This is a great example of how the public sector can work together with the private sector and enhance the local economy. Read the article below.

[econdev]

Community still waits for new car company

I read with interest today about new car company GreenTech Automotive's plans for a community in Mississippi. Unfortunately for the local residents, the car company's plans have not come to fruition after almost four years.

The community provided free land for the project; the state threw in money to cover grading and site preparation costs.

I point this article out for two reasons. First, stories like this are what gives the economic development profession a bad reputation. Second, project announcements of this nature provide a false hope to communities already down on their luck.

Hopefully this project actually happens. If not, let's hope there were clawbacks in the deal to protect both the local and state incentives.

[econdev]

The Value of Hard Work

Hard work can never be understated and is really the backbone of a successful company or community. I read a great story about this on CNN Money this morning, basically the tale of going from pizza delivery man to store owner.

Twenty-five years ago, Rob Cookston got his start delivering Domino's pizzas from his cherry red Volkswagen Beetle. Today, he owns 18 of the chain's franchises.

Five years after he became a manager, Cookston borrowed money from his parents and grandparents and bought his first Domino's franchise on 23rd Street in New York City in 1994. For the next five years, the newly-minted store owner lived in the basement of another Domino's branch in the city and saved enough to buy two more locations.

Read the entire store at CNNMoney.com.

[econdev]

Manufacturing Leaving China?

The Atlantic recently published an article about General Electric moving its appliance manufacturing operations back to the States from China. A great (and lengthy) article, it highlights some of the challenges businesses are facing in China.

For much of the past decade, General Electric’s storied Appliance Park, in Louisville, Kentucky, appeared less like a monument to American manufacturing prowess than a memorial to it. The very scale of the place seemed to underscore its irrelevance. Six factory buildings, each one the size of a large suburban shopping mall, line up neatly in a row. The parking lot in front of them measures a mile long and has its own traffic lights, built to control the chaos that once accompanied shift change. But in 2011, Appliance Park employed not even a tenth of the people it did in its heyday. The vast majority of the lot’s spaces were empty; the traffic lights looked forlorn.

Yet this year, something curious and hopeful has begun to happen, something that cannot be explained merely by the ebbing of the Great Recession, and with it the cyclical return of recently laid-off workers. On February 10, Appliance Park opened an all-new assembly line in Building 2—largely dormant for 14 years—to make cutting-edge, low-energy water heaters. It was the first new assembly line at Appliance Park in 55 years—and the water heaters it began making had previously been made for GE in a Chinese contract factory.

For the rest of the article, click here.

[econdev]

New York Times Article on Incentives

Take it for what it's worth, but the New York Times has published an article on business tax incentives. While I don't doubt that there are many communities throwing cash at companies, the smart ones are using claw-back provisions to measure project progress and protect the taxpayers. The article seems a little one-sided but take a look:

As Companies Seek Tax Deals, Governments Pay High Price

[econdev]

Rebranding a Place

An important part of economic development is your community's brand. Whether you are part of a larger regional brand like Charlotte Regional Partnership or Cincinnati USA, or a smaller brand such as Chattanooga Can Do, it's valuable to brand your community.

What happens if the community's brand is now stale and outdated? It can be difficult to rebrand the community especially if the attributes associated with the brand are negative. More likely to be found, however, is a community who is judged by its past. Ask someone you know about Pittsburgh and chances are they will mention steel, industrial or other related words. The NFL team is named the Steelers! But visit Pittsburgh and you will realize that their economy now features health, educational and technology as well as manufacturing.

Companies do this all the time, but communities and places don't always think about this. The area may be well-known to those that live there, but what about international companies or site selection consultants? If those that will be investing in your community don't know where you are located or what the community's attributes may be, it's highly unlikely that you will be considered for a location.

Every place has a story to tell and it's important that the brand reflects this.

[econdev]

ICSC Southeast and the power of sales tax

Each year at ICSC Southeast seems to attract more and more cities and economic development organizations. It was great meeting the different retailers and developers at ICSC. To me (and luckily for our community), retail is an important factor of economic development. The jobs may not pay the highest, but they are jobs and retail provides quite a bit in tax revenue.

For example, the average Kohl's store does about $16.7 million in sales each year. If your community collects 2%, that adds up to $334,000 each year in sales tax revenue! What if it's a smaller community?

The average Dollar General has annual sales of about $1.5 million. Again, assuming 2%, that's $30,000 in sales tax revenue each year for your community. McDonald's... about $50,000 in sales tax revenue. Walgreens... about $170,000 in sales tax revenue each year.

My point is that retail, small or large, quickly adds up. That 2% or more that a community collects is a big deal for tax revenue. That's not even including property tax from the retailer, which often brings up the value of a property.

Communities should not overlook retail, especially now as the commercial real estate market begins to improve.

[econdev]

IEDC Awards

It's always exciting to get recognized for a job well done. Last week in Houston, many different organizations were recognized for strong economic development programs or activities. Our organization was no exception.

I attended the IEDC Awards ceremony to receive a Silver Excellence in Economic Development Award for our small business website. I take much pride in this achievement as I was the one that put together the design and content for the site. Many times our work goes unrewarded so this was a great opportunity to receive some recognition!

You can view all of the award winners at the source link below.

Below is a picture of me from the awards ceremony at the IEDC Annual Conference.

[econdev]

Workforce Development +1

Often times one of the main drivers in a site selection project is workforce. Every community claims to have the workforce and training necessary to woo a big manufacturer to their town. Many actually do, but one community has taken it to the next level.

Tuscaloosa, Alabama will be providing a workforce development academy to Mercedes Benz. According to a news release, the Tuscaloosa City School System and Mercedes-Benz U.S. International are teaming up to offer a weekend academy for high school students interested in working for the automotive industry giant after they graduate.

By enrolling and participating in the academy, students will be given a chance to enroll in one of two apprenticeship programs in mechatronics or automotive production. The model for the academy is one that Mercedes Benz has used for the past 15 years in Germany.

As talk and money continues to shift to the "skills gap", I think you will start to see school districts and manufacturers become more aligned in education. One of the main advantages that Georgia has offered is the customized free-of-charge training through Quick Start. I wonder if you will start to see this more on a local level instead of just state level.

[econdev]

GEDA Annual Conference Recap

I just got back from the Georgia Economic Developers Association Annual Conference in Savannah. It's always an enjoyable conference especially when you can connect with other professionals. Below are a few of my observations and notes from the conference.

There was an app for the conference which allowed you to set up your schedule, make friends, read bios on the speakers, takes notes and much more. Very cool and I hope other conferences move forward with this trend. Available for both iphone and android phones.

The Georgia Center of Innovation for Logistics had a presentation in which they announced their County Spotlights. These are custom-built reports (pdfs) for each county in Georgia and showcase the logistics industry in an easy-to-read format. This is perfect for sending to site selectors and prospects.

Georgia Power unveiled some economic modeling for workforce data that I was unaware of. I'm sure most utility companies have access to this data but it includes wages and number of jobs by industry. You can drill down to zip codes and the exact occupation. Again, perfect for site selectors and prospects.

[econdev]

Got Typeface? Chattanooga, a type unto itself…

Reposted from The Valley Works:

In November 2011, a small group of designers and entrepreneurs began a grassroots effort to make Chattanooga the first city in the U.S. to have its own typeface. Custom fonts for municipalities have been common in Europe, but this is the first time it’s been done in the United States.

The designers of the typeface, called Chatype, used Chattanooga reference points, including the Cherokee alphabet, the nation’s first Coca-Cola bottling plant, and signage from the famous “Chattanooga Choo-Choo” train station, to capture a local feel.

Not only did this entrepreneurial group design the typeface, but they also used digital technology to fund the initiative. In January 2012, an online fundraising campaign began on Kickstarter.com, which describes itself as a “fund ing platform for creative projects,” to raise more than $10,000 to help cover costs and make the font available for use by Chattanooga area businesses. The fundraisers exceeded their goal in March.

In a video produced for Chatype’s funding, Chattanooga City Councilman Andraé McGary says the effort is all about character: “All cities that are memorable have character. When you think of New York, you have a certain image that comes to mind. And the more that we as a community, as Chattanooga, can capture our spirit and put it in a meaningful, bite-sized way for people to get, I think it’s very important.”

Developers Robbie de Villiers and Jeremy Dooley say the font’s flexibility allows its use by different Chattanooga neighborhoods in different ways. ”As we currently envision,” Dooley says, “the font will be available without cost exclusively to Chattanooga. We hope to see the font used for the city website as a Web font, for city-associated signage, brochures, logotypes, and even private enterprise projects with a Chattanooga focus. We anticipate creating four weights, and style sets would allow unique font customizations for each district and major subsection of the Chattanooga metropolitan area, giving each area its own unique identity while still being part of the whole of Chattanooga.”

There is no doubt that this concept is branding at its finest. The American Marketing Association (AMA) defines a brand as a “name, term, sign, symbol of design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers.” Strong branding is a valuable asset for an organization as we all endure a tough marketing battle to get and keep customers.

How we utilize branding does make an impact on how company executives, prospects and existing customers perceive our value and credibility. Differentiation and branding are musts to market our communities.

To be able to be “the first” gives Chattanooga a distinctive edge and also great publicity and marketing advantages. With the font available at no charge to area Chattanooga businesses, it allows integration of a unified community brand strategy through multiple public touchpoints, including area residents and prospects, as well as in the global marketplace.

Congratulations to the Chattanooga community for providing an excellent model for entrepreneurship and forward-thinking community branding.

[econdev]

Some Gardening in Denver

There's many different economic development strategies and one that I particular enjoy is gardening. Basically it's the notion that nurture and grow your small local businesses. This way can be more resource-effective than providing incentives for a large project.

Denver has stepped up the gardening with it's first ever business plan competition. The JumpStart Biz Plan Awards program will recognize the top ten start-up and early-stage business plan finalists with tools to help their businesses grow in Denver. The prize for winning? A cool $50,000! Not only that, but the winner receives free office space, legal advice, accounting services, marketing services and social media assistance!

This sounds like a really cool idea and I'll can't wait to see who eventually wins.

[econdev]

Mass. Governor Signs Economic Development Bill

In what always seems a case of one-upmanship, every state is always trying to outdo the others. It's pretty much a continuous cycle as every state and governor wants to be the one that "creates jobs."

Massachusetts Governor Deval Patrick signed a new economic development bill on Tuesday, but not without using his special veto pen. It appears that most of the bill, at least the parts that survived, are aimed at increasing innovation within the state. $50 million was allocated to a Scientific and Technology Research and Development Grant Fund that businesses and universities can use. There was also $1 million for the Massachusetts Technology Collaborative and $1 million for incubator and accelerator programs.

Some of the items that were vetoed include a $28 million-a-year extension of a tax credit for cleaning brownfield sites and a $10 million increase in a tax credit for historic preservation work.

The legislation also creates a one-stop web portal for small businesses through the Office of Business Development. I think this last piece is very helpful as I can't tell you the number of times entrepreneurs have called me asking for help on basic items. One-stop web portals makes it so much easier for small businesses and I wish more communities and states would create them.