Presentation - RW Ventures

Report
Driving Regional
Economic Growth:
Opportunities for Cook County
Presentation to the
Economic Development
Foundations Working Group
August 31, 2011
Robert Weissbourd
Agenda
It’s One Economy
“Metro-Economics”
Opportunities for Cook County
Key Lessons and Next Steps
Discussion
Origins: From “Equity” to … “Equity”
Civil Rights
Empowerment
Economic Development: Assets
Economic Development: Markets
Putting the Economics in Economic Development
Poverty and Economic Development
“… poverty has no causes. Only
prosperity has causes.
Analogically, heat is a result of
active processes; it has causes.
But cold is not the result of any
processes; it is only the absence
of heat. Just so, the great cold of
poverty and economic
stagnation is merely the absence
of economic development. It
can be overcome only if the
relevant economic processes are
in motion.”
-- Jane Jacobs
Photo from Shelf-Basin Interactions
Neighborhoods are Nested in Larger Systems
Which Drive the Flows of People and Capital
Neighborhoods arise from the interaction of regional
economic, social and political systems with physical place.
Market Failure in Lower Income Communities
Connectedness
Poverty
• Undervalued,
underutilized assets
• Employment networks
• Entrepreneurial opportunities
• Business, real estate investment
• Expanded products and services
• Competitive, healthy communities
Productivity
Isolation
LIC economic development reconnects poorer people and
places to the economic mainstream.
The Pieces of Economic Development …
Succeed or Fail “In Context” of Each Other
Infrastructure
Business Development
Education
Housing
Sustainability
Workforce
Training
Strategic economic development designs and delivers the
programs to create a whole greater than the sum of the parts.
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
 Goal is economic development - that is inclusive and sustainable.
 Metros are the means, not the ends
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
 The outputs we care about – jobs, income, assets, sustainability – are
primarily a function of the complex interaction of housing, labor, business
and other market systems, enabled and shaped by government and civic
sector activity
 Goal is to improve performance of these systems
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
 System performance is function of interactions of people and firms in
context of characteristics of place – “on the ground.”
 Key geography of many of these systems and interactions is
metropolitan region. (Metro includes, but is more than sum of, its
neighborhoods. Best neighborhood development deploys people and
assets into metro economy, improving both.)
 Indeed, one of main reasons for very existence of cities is the
agglomeration benefits of concentrating economic activity – an effect of
place on market performance.
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
Improving Metro Economic Performance Entails Customized Analysis and Deliberate
Activity
 System and environmental characteristics, opportunities and challenges
“on the ground” vary by place.
 Particularly in the knowledge economy, increasing returns and imperfect
competition are giving rise to specialization and divergence. It is more
important than ever to be deliberate and strategic, as the economy no
longer “takes care of itself.”
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
Improving Metro Economic Performance Entails Customized Analysis and Deliberate
Activity
Economic growth entails strengthening metro economies,
and that requires deliberate, ground-up, tailored activity.
Agenda
It’s One Economy
“Metro-Economics”
Opportunities for Cook County
Key Lessons and Next Steps
Discussion
Top 100 Metros Share of U.S. Total
92%
Service Exports
Graduate Degrees
Wind + Solar Energy Employment
Population
79%
Venture Capital Funding
Gross Product
66%
78%
Airline Boardings
76%
U.S. Air Cargo Weight
75%
Patents
73%
75%
94%
Sources: Brookings analysis of US Census Bureau, FAA, BLS, NIH, NSF, and BEA data; Brookings, ExportNation, 2010 (2008 data); Forthcoming research from Brookings and Battelle
How Metro Economies Grow
 Metro economy = total value of goods and services
produced in the region
 Growth is inherently business sector growth (number, size
and profitability of firms)
 Business sector grows through firm creation, growth and
location decisions (retention and attraction)
 Firm creation, growth and location depend upon increases
in efficiency and productivity (of firm and system, including
product innovation)
Core Question: What attributes of the region increase
efficiency and productivity, leading to business sector growth?
What
is
it
About
Place
that
Affects
Keys
to
Influencing
Economic
Performance
Economic Performance?
New
Growth
Theory
New
Growth
Theory
Economic
Geography
Institutional
Economics
Act Comprehensively – The Whole is
Greater than the
Sum of the Parts.
Economic
Geography
Customize.
Develop Institutional Capacity and
Intentionality.
Institutional
Economics
What Drives Inclusive and Sustainable
Economic Growth?
Local (Regional) Enabling Environment
(Government regulation, tax and public goods, including
particularly infrastructure and education; civic institutions;
qualities of place, including the natural environment; etc.)
Inputs to
Production
(Human capital; real estate;
capital; natural and
knowledge resources; etc.)
Key Systems
(Market processes – housing,
labor, etc.; production
dynamics – clusters, value
chains, etc.; innovation
dynamics - knowledge
creation, networks,
commercialization, etc.)
Macro/Global Context & Trends
Economic Outputs
(Businesses – gross regional
product, profits; households
– wages, other income, etc.)
Leverage Points
Create Effective
Public & Civic
Culture &
Institutions
Enhance
Regional
Concentrations
Deploy
Human Capital
Aligned with
Job Pools
Leverage
Points
for Sustainable
and Inclusive
Prosperity
Increase
Spatial
Efficiency
Develop
InnovationEnabling
Infrastructure
Economic
Development
in the Next
Economy
Global, Knowledge
Economy
Specialization and
Dynamism
Intentionality
Build on Your Assets
Coordinated, CrossSectoral, Flexible,
Adaptive, Open,
Information-Rich,
Inclusive,
Entrepreneurial
Compete on
Value-Added
(not low-cost)
Metropolitan Business Planning:
A New Way of Doing Business
Grounded in Economics and Business
Comprehensive, Actionable
Strategies
An Ongoing Enterprise
Enables “New Federalism”
Northeast
Ohio
Puget Sound
Source: Brookings Institution
Pilot
Metro
Business
Planning
Regions
Minneapolis-St. Paul
Agenda
It’s One Economy
“Metro-Economics”
Opportunities for Cook County
Overall Regional Performance
Key Lessons and Next Steps
By Leverage Point:
Discussion
Definition and Practice
Regional Status
Exploring Roles for Cook County
Strong Assets
Chicago Region's GRP in Context
GDP in Billions of USD
600
500
400
300
200
100
0
Source: International Monetary Fund
If the Chicago MSA were a nation, it would have
the 20th largest economy
Losing Momentum
Ratio of Chicago area per
capita GRP growth to U.S.,
1980-2009
Cumulative Job Growth,
1992-2008
30%
U.S.
1.04
Chicago MSA
25%
1.02
1.00
20%
0.98
15%
0.96
10%
23.2%
6.3%
0.94
5%
0.92
0%
0.90
1992
1980 1985 1990 1995 2000 2005
-5%
1996
2000
2004
2008
Source: National Establishment Time Series
Source: Moody’s Analytics; MCIC
“Strong Balance Sheet, but Poor Income Statement”
Lots of ED Activity; Little Coordination
Excelerate Labs
Greater SW
Development
Corporation
Chicago
Technology
Park
Choose DuPage
IL Clean Energy
Community
Illinois
Apparel IndustryFoundation
Technology
Board
Association
Global Midwest
Alliance
CMAP
iBio
Chicago
Biomedical
Consortium
Source: Regional
Economy Initiative,
Metropolis Strategies
and RW Ventures.
DCEO
Clean
Economy
Network
Enhance Regional Concentrations:
Industries, Occupations and Functions
What is it?
 How the firms and related institutions in the production side of
the economy interact and concentrate, or “cluster,” influencing
their efficiency and productivity
Aspects to consider include:
 Current concentrations and their geography
 Areas of high growth potential
 What shared inputs, activities, infrastructure and other factors
contribute to efficiency/productivity of targeted clusters
 Extent to which clusters have already self-identified and
organized
Strategies might include:





Provide co-location opportunities (e.g., business parks)
Strengthen institutional and network infrastructure
Cluster-specific training, R&D, infrastructure, finance, etc.
Cluster-specific innovation/entrepreneurship
Attraction of complementary firms
Regional Status: Strong but
Underperforming
1.6  Diverse
FIRE & Business
Services
Transportation &
Warehousing
1.4
Headquarters
Location Quotient, 2010
1.2
Nondurable
Goods Mfg
Durable Goods
Mfg
Consumer Utilities
Industries
Health & Welfare
1
Tourism
Construction
0.8
economy, with
complementary
specializations, in both
conventional and functional
clusters
 Many of the biggest clusters
are growing more slowly than
their national peers
 Strengths in logistics, business
0.6 services, food processing,
metal/machinery manuf.,
health care/life sciences, …
Information &
Media
0.4
-30000
-25000
-20000 -15000 -10000
-5000
0
Local Share - Chicago Competitiveness, 2010
*Size of bubble represents 2010 Gross Output
Sources: MCIC; Regional Economy Initiative, Metropolis
Strategies and RW Ventures.
5000
 Several groups are pursuing
0.2 cluster studies, but few
comprehensive, business
driven cluster strategies are
0
underway.
10000
Exploring Roles for Cook County
 In Its Own Businesses
 Support business formation and growth in County
supply chains (e.g. Evergreen Cooperative Initiative…)
 Strengthen green buildings cluster by retrofitting
County buildings, driving demand for energy efficient
products and services
 In Its Economic Development Programming
 Target programs (e.g., WIA, CDBG) to support the
region’s most promising clusters, such as Freight and
Logistics
 Through New Initiatives and Partnerships
 Lead organization and development activities in Health
& Medical cluster
Preliminary and Illustrative: For Discussion Purposes Only
Deploy High Human Capital Aligned
with Job Pools
What is it?
 Linked, mutually reinforcing human capital and job pools
 Efficient labor market deployment
 Opportunity and mobility
Aspects to consider include:
 Concentrations and growth prospects (both skills and occupations)
 Alignment of human capital and job market
 Quality of education/training systems (K thru lifelong learning)
 Attraction/retention record and factors
 Labor market efficiency
Strategies might include:
 Increase demand-side focus of workforce development
 Increase access, reduce transaction costs in labor market
 Establish career pathways, apprenticeships, etc. to foster
economic mobility
 Target and link production, attraction, retention of
workers and firms
Regional Status: Bifurcated
 Slightly above average in percent
of knowledge workers
 Attracting talent from around the
world (as indicated by flow of high
skilled immigrants)
 52% of all Illinois jobs are “middle
skill,” but in 2008 there was a 9%
shortfall in workers with the skills
to fill them
 Production of human capital is
mixed – world class universities,
uneven community colleges, many
failing elementary and high
schools
Percent of Population with
At Least Each Level of Education
100%
Cook
County
90%
80%
City of
Chicago
70%
Suburban
Cook
60%
50%
MSA
40%
30%
Illinois
20%
10%
 HC development system
fragmented and not sufficiently
employer driven
USA
0%
High School Some College Bachelor's
Degree
or an
Degree
Associate's
Degree
Advanced
Degree
Sources: Brookings Top 100 Metros Metrics; Illinois’ Forgotten MiddleSkills Jobs, The Workforce Alliance, 2008; Graph based on data from U.S.
Census Bureau, American Community Survey, 2005-2009 Estimates.
Exploring Roles for Cook County
 In Its Own Businesses
 Use the County’s human capital system to model skill
certifications, job ladders, mobility (focusing on
healthcare and criminal justice)
 In Its Economic Development Programming
 Tailor workforce development and prisoner reentry
programs to be more employer/market driven, and tie
to needs of high-growth clusters (e.g., freight and
logistics)
 Through New Initiatives and Partnerships
 Consolidated County-City workforce investment
management
Preliminary and Illustrative: For Discussion Purposes Only
Develop Innovation-Enabling
Infrastructure
What is it?
 New products, services and business models – the only long
term driver of overall growth
Aspects to consider include:
 Overall “ecosystem” – supporting institutions and networks
 Performance at particular stages (R&D, commercialization,
entrepreneurship)
 Cluster-specific innovation dynamics/opportunities
 Public-sector enablers/constraints
 Availability of stage-appropriate finance
Strategies might include:
 Strengthen regional R&D capacity (education, facilities, funding)
 Catalyze commercialization of knowledge through researchindustry linkages
 Foster entrepreneurship through capital access, technical
assistance, mentorship
 Develop rich networks supporting interdisciplinary crossfertilization and deal formation
 Support cluster-based innovation
$2,500
Venture Capital Investments by State
($M)
2009
2010
$2,000
Source: PWC
MoneyTree
 Average levels of
business churn and low
numbers of high impact firms
 Limited innovation networks,
ecosystem, culture (but emerging,
particularly in IT/digital)
$1,500
Total Patents Granted Index,
U.S. v. Illinois
$1,000
3.0
$575
2.5
$500
$192
 World class research universities and
R&D centers, but limited
commercialization
 Uneven capital access for entrepreneurs
(e.g. low SBA lending)
CA
MA
NY
TX
WA
IL
PA
CO
NC
U.S.
IL
2.0
$-
NJ
Millions
Regional Status: Underperforming, but
Improving
1.5
1.0
0.5
Source: U.S. Patent & Trademark Office
Sources: Regional Economy Initiative by Metropolis Strategies and RW
Ventures; Brookings Top 100 Metros Metrics.
Exploring Roles for Cook County
 In Its Own Businesses
 Develop key innovations related to County
operations: digitalization of patient records; next
gen. computer-based property assessment; hospital
interpretive services; paperless permitting and
electronic plan reviews
 In Its Economic Development Programming
 EDA innovation grants?
 Through New Initiatives and Partnerships
 Work with other stakeholders to create R&D centers
(e.g., patient records, foreclosure management,
etc.)
Preliminary and Illustrative: For Discussion Purposes Only
Increase Spatial Efficiency
What is it?
 The geographic arrangement of households and firms –
producers, suppliers and consumers – within the region
determines transportation costs for people and businesses, and
influences agglomeration benefits
Aspects to consider include:
 Public policies re: land use/zoning, infrastructure, etc.
 Degree of housing-jobs mismatch
 Access to transit, commuting times, etc.
 Spatial concentrations of firms, occupations, functions, etc.
Strategies might include:
 Focusing development in infrastructure-rich areas
 Transit-oriented and mixed-use/mixed-income development
 Affordable housing programs (inclusionary zoning, etc.)
 Avoid segregation and concentration of poverty
 Travel pricing strategies (e.g., congestion pricing)
Regional Status: Dense Nodes, but
Stuck in Traffic
Housing Costs as
Percent of Income
Housing + Transportation
Costs as Percent of Income
 79% of Northeastern
Illinoisans have access to
transit, BUT only 24% can use transit
to access their jobs
 The Chicago region is the 3rd most
segregated of the top 100 metros
 Lack of funding for needed
infrastructure improvements
 Housing sprawl and lack of transit
investment have led to the 4th longest
commutes to and from work, mostly by car
 The metro area is the 3rd most congested in
the nation, costing the region $7.3 billion
annually in wasted time and fuel
Sources: Housing and Transportation Affordability
Index by CNT; Brookings Top 100 Metros Metrics.
Exploring Roles for Cook County
 In Its Own Businesses
 Provide employer assisted housing near large centers
of County employment
 Incent alternative modes of transportation (providing
employees with transit benefits, free and secure bike parking,
etc.)
 In Its Economic Development Programming
 Promote spatial efficiency through Building and Zoning
activities
 Use NSP, HOME and other funds to support transit oriented
development and otherwise encourage spatial efficiency
 Through New Initiatives and Partnerships
 Coordinate with regional affordable housing initiatives
Preliminary and Illustrative: For Discussion Purposes Only
Create Effective Public & Civic
Culture & Institutions
What is it?
 The institutional environment, made up of governments,
private and civic associations, enables and influences the efficiency of
economic activity
Aspects to consider include:
 Degree of horizontal and vertical fragmentation
 Tax/value proposition
 Governance: cross-sectoral partnerships; broader institutional capacity
and culture; transparency, openness, responsiveness
 Information: availability and use of data for economic development
Strategies might include:
 Inter-jurisdictional coordination/cooperation, including consolidation and
shared services
 Revenue sharing
 Strategic engagement of citizens, private and civic sectors (particularly
program-specific, such as community policing)
 E-government
 Open data/data-sharing initiatives
 Permit/license fast-tracking
 Special-purpose entities
Regional Status: “C”
Government Coordination:
 1,226 units of government within the
seven-county metro area.
 More governments per capita than 2/3rds of major
metros
 Lack of public trust
Tax & Regulation/Value Proposition
 Complex, multi-faceted tax and regulatory systems.
 Value proposition uneven
 Illinois taxes fewer services than 46 other states and
has a sales tax rate higher than 46 other states.
Governance
 Uneven – selectively cross sector, open and inclusive;
often top-down and “who you know”
Information Sharing
 The region is improving but still lags other metros in
transparency and public data.
Sources: “The Economic Impacts of GOTO2040,” RW Ventures, 2010; Brookings Top 100
Metros Metrics; “Public Finance Issues in the Chicago Metropolitan Area,” CMAP, 2009.
Exploring Roles for Cook County
 In Its Own Businesses
 Act as model of transparent government, including
data sharing
 Implement Government 2.0 practices to increase efficiency
and encourage citizen engagement
 Lower the sales tax rate and expand the tax base to include
many services
 Improve and make more transparent the value provided for
taxes
 Ensure sensible and consistent regulations and minimal
bureaucracy
 In Its Economic Development Programming
 Pool funding within County programs and across other
agencies for performance-based competitive grants
 Through New Initiatives and Partnerships
 Convene, participate with other governmental, private and
civic actors in regional economic planning
 Promote shared services agreements
Preliminary and Illustrative: For Discussion Purposes Only
Agenda
It’s One Economy
“Metro-Economics”
Opportunities for Cook County
Key Lessons and Next Steps
Discussion
High Road Development
Skilled
Workers
Subsidies
Regulation
Low-wage
Good
Infrastructure
Key Lessons
Undertake “high road” development
 Build from your assets
 Compete on value-added, not just low cost
 Tailor tax-value proposition
Be intentional
 Customized, integrated, tailored to local opportunities
 Metropolitan Business Planning
Act in context
 Design for whole greater than the sum of its parts
 Allow economics to dictate the geography
 Align equity goals with economic development
 Understand spectrum from social service to economic growth
“Metros are the solution, not the problem”
 Federal and state governments should invest in metros.
Next Steps
Opportunities for
the Region
(with County “lens”)
Roles for
the County
Inventory assets and
opportunities
Evaluate Cook government
programs and competencies
Strategy Identification
Identify high potential
strategies integrating key
market leverage points
Target strategies best suited to
County business, programs,
capacities
Program/Product/Policy
Development
Coordinate and create
initiatives to implement
strategies
Reorient existing programs,
create new ones, coordinate to
implement selected strategies
Institutional Capacity
Building
Regional business
planning/execution (gen.
and project specific)
•Convene, participate in RBP
•“Governance for the next
economy”
Market Assessment
Preliminary and Illustrative: For Discussion Purposes Only
Discussion
Driving Regional
Economic Growth:
Opportunities for Cook County
Presentation to the
Economic Development
Foundations Working Group
August 31, 2011
Robert Weissbourd

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