Posts by: Economic Development HQ.com

NY AG LDC Review Shows Mismanagement

New York Attorney General Eric Schneiderman’s review of non-profit local development corporations has many LDCs quaking in their boots.

NY AG Eric Schneiderman

Photo credit - Office of the NY AG

They may have reason to feel threatened too, because the AG review of salaries and spending by the state’s 200 LDCs says many are badly mismanaged. The words used include nepotism, self-dealing and improper loans.

For example, the West Harlem LDC was created five years ago and is supposed to distribute $76 million in community benefits donated by Columbia University. The AG’s investigation of this Harlem LDC showed they still don’t have a director or a website. Even worse, they have provided no way for the community to apply for funds.

They have collected $3.5 million from Columbia and spent $702,000. One of its board members even tried to get $85,000 in expenses approved without notifying anyone else. The sham LDC was simply being used to collect funds from Columbia in return for approval of a $6.3 billion expansion plan.

In another case, two LDC’s that provide community-based mental health services¬†(Multi-County CDC and Rehabilitation Support Services Inc.) are being used to generate personal wealth for one William DeVita.

DeVita is president of Multi-County and an executive director of Rehabilitation Services. His wife is on the Multi-County board and his sister works for Rehabilitation Services. DeVita himself is additionally a paid staffer for Rehabilitation Services. Apart from this, DeVita is listed as the chairman and CEO of a for-profit company called Job Builders which is owned by Rehabilitation Services.

AG Eric Schneiderman says what’s happening at Multi-County and Rehabilitation Services is representative of LDCs across the board.

In related news, a state Authorities Budget Office report says Schenectady County has a complex network of seven economic development entities that do not coordinate. Many projects are tapping one entity after another for funds without telling the other entities about it.

One IDA has no outstanding bonds and should have been dissolved, but still continues to operate. This situation is after the county eliminated 10 other development organizations that existed before 2004.

Christmas Retail Means Jobs… In China

In his Christmas Eve Mass homily, Pope Benedict XVI urged people to focus on the message of Christ’s birth instead of the “superficial glitter.”

No doubt it’s important to remember the true meaning of Christmas, but a big part of the “superficial glitter” is the $469.1 billion in retail spending ‚Äì a 3.8 percent holiday sales bump this year that is critical for the economy.

Christmas Retail means jobs

Photo credit - NRF

According to forecast data provided by the National Retail Federation (NRF), shoppers have spent over $704 on average for holiday purchases this year.

The retail industry added around half a million (480,000 to 500,000 forecast) seasonal jobs this year to handle the holiday shopping crowd and sales bump.

“The hundreds of thousands of jobs created during the holiday season help people support their families by supplementing their household income and providing generous employee discounts,” said NRF President and CEO Matthew Shay.

If this entire $469.1 billion was spent on “Made in America” products, it would create 4.6 million jobs. Many sectors do get the full benefit, such as travel ‚Äì the AAA forecasts that 91.9 million Americans are traveling for the holiday season.

But that’s not the way it works in retail, where an overwhelming majority of the gifts purchased are imported goods. An examination of 24 categories of consumer goods on which Americans spent 143 billion dollars showed that 80 percent were imported. China alone accounted for 43 percent.

On ABC, Diane Sawyer pushed a “Made in America Christmas” campaign asking her World News audience to spend at least $64 on American made goods while holiday shopping, which would result in 200,000 new jobs.

But these campaigns have historically been let-downs because people are more concerned with saving money with cheap imported goods. The trend continues this year, because the US economy is up 3.94 percent this year while imports in the Christmas goods sector went up 5.8 percent. For sure, Christmas is merrier in China this year.

AAE Survey: Energy Saving Technology Creates Jobs

A new survey by Austin, Texas based Advanced Energy Economy (AAE) shows that a majority of Americans believe that enhanced use of energy-saving technologies creates U.S. jobs.

AAE survey

Photo credit - AAE

The online survey of 1,004 adults conducted earlier this month shows a high level of concern over the economic and national security impacts of the rising price of gas and electricity in the long run.

A full 62.3 percent believe that the cost of gasoline will be $5 a gallon or more in 5 years. Among those surveyed, 82 percent say the nation’s current dependence on foreign oil is a crisis or major problem.

There’s also concern over electricity production and distribution, with 57 percent saying the nation is in crisis or has major problems when it comes to how electricity is made and delivered in theU.S.including its cost, reliability, safety, and public health and environmental impact.

An overwhelming majority (73 percent) report that the amount they‚Äôve spent on their electric and heating bills in the last 3 years has gone up “a lot” or at least ‚Äúsome.‚Äù

Fifty-five percent believe that efforts to make greater use of energy saving technologies have been “positive” because they save money over the long run and make the economy more productive and competitive.

While 55 percent believe that energy saving technologies create jobs, another 19.5 percent believe that it reduces jobs.

Note that a McKinsey study (Unlocking Energy Efficiency in the U.S. Economy) has found that retrofitting 40 percent of America’s homes and offices for greater energy efficiency would create 625,000 sustained full time jobs over a decade. Not to mention $64 billion in annual savings on utility bills.

A comprehensive energy efficiency strategy would reduce non-transportation end use energy costs by more than $41.2 trillion by 2020, and would only need an initial outlay of $520 billion.

Energy efficiency will indeed impact the coal and oil & gas industries negatively. But it is more than made up by new jobs created due to energy efficiency retrofitting. According to the Political Economy Research Institute (PERI) at the University of Massachusetts, a million dollars invested in:-

  1. Energy efficiency retrofits creates 17.36 jobs
  2. Coal industry creates 6.86 jobs, and
  3. Oil & Gas creates 5.18 jobs

It’s not much of a contest, and the sustainable development benefits of $520 billion in energy efficiency investment and over half a million green jobs haven’t even been discussed.

Maryland Declares Itself Prime Suspect for FBI Headquarters Hunt

Maryland is working overtime and undercover in a bid to bring home the new $1.2 billion FBI headquarters. The Federal Bureau of Investigation is looking for a 2.1 million sq ft office complex in the capital region for its vast headquarters.

FBI headquarters

Photo credit - Senate.gov

Their current home in the J. Edgar Hoover Building is overcrowded and the spillover of new operations launched after 9/11 has pushed the FBI into more than 20 different buildings spread around the Greater Washington region.

Based on studies conducted over the last decade, the FBI and General Services Administration (GSA) considered three possible alternatives:-

  1. Modernize the Hoover Building (rejected).
  2. Demolish the Hoover Building and construct a new headquarters on the existing site (rejected).
  3. Acquire a new headquarters on a new site (approved).

They’re now looking to consolidate all the offices at a new site near the Beltway to increase security and reduce costs to the tune of $44 million per year.

Earlier this month, the Senate Environment and Public Works Committee (EPW) passed a resolution directing the GSA to enter into a private sector lease. A private firm will get the contract to build a 2.1 million sq ft facility on federal land, and the facility will then be leased to the FBI.

The federal government will sell the J. Edgar Hoover Building for $500 million and consolidation of existing FBI leases will provide another $100 million. This $600 million will apparently cover the cost of the new “lease.”

At the end of the lease term, the ownership of the building would be turned over to the Federal government at no additional cost, so tax-payers won’t have to finance a sprawling new FBI headquarters.

The new complex won’t likely be completed until 2020, but the site selection process could begin next year with solicitations to developers. The site has to be within 2.5 miles of the Washington Beltway and not more than 2 miles from a Metro station.

Prince George’s County, MD has already launched a stealth campaign to identify properties to the FBI before Virginia and Washington get into the mix.

Considering the limited radius and availability of the 55-acre parcel of federal land specified in the EPW resolution, there are only so many sites that can be considered. Loudoun County in Virginia is one possibility, and Maryland has multiple sites, including in Suitland and Greenbelt, both in Prince George’s County.

Maryland’s Department of Business and Economic Development is also involved in the covert ops. The organization’s deputy director Jayson Knott refused to identify specific sites, but told the Baltimore Sun that he expects site selection will be a part of the competitive process next year.

“The Greater Washington Area has many viable options that will meet the specific requirements needed to restore efficiency and security to our nation’s premier law-enforcement agency while saving taxpayer resources,” said U.S. Senator Cardin (D-MD). “Such a move will be advantageous to the agency as a whole, as well as each of the 17,300 employees of the FBI headquarters, approximately 40 percent of whom currently reside in Maryland.”

Sen. Cardin was one of the prime movers behind the EPW resolution and also instrumental before that in ‘guiding’ the FBI and GSA to agree to abandon the Hoover Building.

Clean Energy Shifts Data Center Site Selection Policy

Two days ago, Facebook gave in to the sustained 20 month “Unfriend Coal” campaign by Greenpeace and announced changes to its data center site selection policy.

How dirty is your data

Photo credit - Greenpeace

“Facebook looks forward to a day when our primary energy sources are clean and renewable, and we are working with Greenpeace and others to help bring that day closer,” says Marcy Scott Lynn of Facebook’s sustainability program. “As an important step, our datacenter siting policy now states a preference for access to clean and renewable energy.”

Facebook also plans to engage in dialogue with utility providers about the sources of energy that power their data centers.

Greenpeace senior IT analyst Casey Harrell adds that Facebook’s policy change now puts pressure on other companies with similarly large data centers, such as Apple, IBM, Microsoft, and Twitter.

This is no small matter, because the energy used to power data that deliver online services is significant, totaling more than 2% of US electricity demand, and is projected to grow 12% or more per year.

Greenpeace came out with a report (How dirty is your data?) earlier this year that highlights the need for greater transparency from global IT brands on the energy and carbon footprint of their Internet infrastructure.

Energy problems also prompted another Bay Area tech giant to move its data center out of California. When Cisco decided it had to move its San Jose data center, they considered more than 140 locations nationwide. The winner was Allen, Texas, where availability and the low cost of power was one of the deciding factors.

Tony Fazackarley, IT project manager in charge of the Cisco data center in Allen, told sbnonline.com that, “The cost and availability of power was also a factor in both the move out of California and the choice of Allen. San Jose constantly has rolling brownouts, and the cost of power is very high.”

Cisco’s Allen data center is an LEED Gold certified green building. The USGBC is working to offer data center-specific LEED specifications. Fazackarley says that once those specifications are available, the Cisco data center will upgrade to an LEED Platinum certification.

Many power companies offer site selection help for companies looking to relocate data centers. Duke Energy’s geographic information system can identify properties ideal for data centers in the Carolinas, Greater Cincinnati and Indiana.

The system identifies available buildings or land near reliable energy sources and away from disturbances that can interrupt data center operations, such as airports, railroads, hurricane paths, tornado activity and other areas susceptible to natural disasters.

Note that the Greenpeace Unfriend Coal campaign was mainly about protesting Facebook’s decision last year to invest $450 million for a new 300,000 sq. ft. data center in Forest City, North Carolina. The data center would rely primarily on coal power produced by Duke Energy.

According to the power company’s own environmental performance metrics data, 62.6% of their power comes from fossil fuel sources, with 55.8% from coal and 6.8% from natural gas/oil.

Facebook is now looking at Lule√•, Sweden for a European data center, where it can get renewable hydro-power and free cooling from the frigid climate. If the Bay Area and East Coast start losing more data centers in Cisco and Facebook’s wake, then power companies may be forced to speed up their own “environmental performance.”

National Cooperative Development Act Introduced in Congress

Congressman Chaka Fattah (D-PA) introduced the National Cooperative Development Act (H.R. 3677) in the U.S. House of Representatives.

Congressman Chaka Fattah

Photo credit - House.gov

The bill, introduced on Dec 15, 2011 by the Pennsylvania Representative with three other co-sponsors, appropriates $25 million a year through 2016 to create and fund the National Cooperative Development Center (NCDC).

Statistics provided by National Cooperative Business Association (NCBA) show that there are:-

-         29,284 U.S. cooperatives with more than 350 million members.

-         They have assets worth over $3 trillion and $652.9 billion in revenue, and

-         They support 2.14 million jobs with $74.96 billion in wages and benefits.

“I thank Representative Fattah and the other co-sponsors of the National Cooperative Development Act for their leadership,” said NCBA president and CEO Paul Hazen. “They recognize that America needs more co-ops to bring jobs, strengthen communities and keep wealth local.”

H.R. 3677 aims to spur job creation and economic development in underserved communities by providing capital, training and other resources to foster cooperative development.

“Cooperatives are a special kind of economic stimulus,” said Congressman Fattah. “Cooperatives benefit the communities they serve while building opportunities for shared wealth. Cooperatives are truly vehicles for protecting the middle class and creating economic growth.”

The proposed NCDC will award grants to nonprofit organizations, colleges, and universities so that they can provide technical assistance to cooperatives or groups that are attempting to form cooperatives.

NCDC will also create a revolving fund to provide loans and seed capital for forming cooperatives.

NCBA has organized 2012 to be the “International Year of the Cooperative” in the U.S. Now they have to hope that Congress cooperates and passes H.R. 3677 in time to give NCBA members something to celebrate.

Michigan’s $5.5 Billion Urban Development Project‚Ķ for Iraq

Move over Detroit, because Michigan is now looking at Baghdad as its job creation engine. A consortium of Michigan companies and public sector entities called MICH Development just signed a $5.5 billion MoU with the National Investment Commission of Iraq.

MICH Development project in Baghdad, Iraq

Photo credit - MICH Development/ICON-GAE

The Memorandum of Understanding is for design-finance-build-operate type completed residential communities – 100,000 dwelling units.

They’re going to start with two 35,000 dwelling unit projects in the Baghdad area. Iraq is planning to build around 2 to 3 million of these units all around the warn-torn nation over the next five years.

With the Iraq War officially declared as history on Dec 12, 2011 by President Obama, this $5.5 billion MoU for urban development signed on Dec 13, 2011 is one among a flood of projects being handed out to American companies on a plate.

GE opened three offices in Iraq last month, and is helping with electricity production and distribution. Best Western, Marriott and Hilton are all building hotels worth hundreds of millions of dollars in partnership with local developers.

FDI flow into Iraq totaled more than $70 billion in the first few months of 2011, with the US alone investing $8 billion. The U.S. State Dept. is helping Boeing Co. and PepsiCo to compete in Iraq, and Exxon is already busy developing six blocks in Iraq after a deal with the Kurds in the north.

As for the $5.5 billion MICH Development project, it will cover 15-20 square miles at a site about 10 miles from the center of Baghdad. It will be a city by itself, with housing, schools, and commercial, recreational and civic components. Of course, there are 10 or 12 other countries at the table, also engaged in talks with Iraq’s National Investment Commission.

But Patrick McRae, director of International Programs for Prima Civitas Foundation (PCF) – the organization which put together the MICH Development consortium, says that Michigan firms could win about $1.5 billion in business from the project in planning, construction, engineering, project management, and green-energy development and procurement.

No doubt this particular project is going to be lucrative for Michigan businesses. But it just might also be the first of many more such projects all over the world. The MICH Development site explains that they are “working collaboratively to establish conduits for positioning Michigan businesses to seize global construction and development opportunities.”

Nevada Tops Economic Development Program Job Performance Survey

A report on job creation capabilities of economic development programs in all 50 states and Washington D.C. shows that state programs run by Nevada offer the most bang for every dollar.

Good Jobs First survey

Photo credit - Good Jobs First

The study by non-profit Good Jobs First titled “Money for Something” focused on the job creation and job quality standards of 238 programs, and rated each one on a scale of 0 to 100.

Nevada scored 82, followed by North Carolina (79) and Vermont (77). The list was book-ended from the bottom by the District of Columbia (4), Alaska (5) and Wyoming (10).

Four out of the 5 economic development programs in D.C. have absolutely no job performance requirement. The average score for all states was 40.

Only 135 of the 238 programs relate directly to job creation, job retention or training for workers.  Of these 135, only 98 require that the new jobs and the facility being subsidized should remain in existence for a specified period. Only 92 refuse to offer subsidies for existing jobs moved in from somewhere else.

Also, $7 billion is being spent on economic development programs that have no job performance requirement whatsoever.

“With unemployment still so high, taxpayers have a right to expect that economic development investments create significant numbers of quality jobs,” said Good Jobs First executive director Greg LeRoy.

Only 98 programs have a wage requirement, and only 53 have wage standards are tied to labor market rates. Only 51 programs spread over 28 states required the employer to make health care plans available, and only 31 out of these 51 actually required the employer to contribute to the cost of the premium.

Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs – Download (pdf)

Illinois House Passes Sears Economic Development Bill

It’s not often that a state will choose to make one company happy at the expense of an entire school district. But times are tough, and the Illinois House chose to keep Sears Holdings Corp. (NASDAQ: SHLD) and its thousands of jobs in-state by passing the Sears EDA bill (SB 397) by an 81-28 margin.

Photo credit - Hoffman Estates, IL

Sears EDA, Hoffman Estates, IL

The bill extends the economic development area around the Sears HQ in the Village of Hoffman Estates, IL by another 15 years. Sears also gets $15 million a year in tax breaks for ten years.

The EDA was set to expire in 2012, and the past 9 months have seen an epic battle as Sears supporters in the legislature tried to get this bill passed over the objections of School District 300. If the EDA ends, D300 gets an additional $11 million per year in school property taxes.

On the other hand, Sears had threatened to relocate outside Illinois if the EDA was not extended. It would have cost Illinois the 6,100 jobs at the Sears HQ inHoffman Estates. On top of that, Illinois would have lost another 9,000 ancillary jobs at vendors, contractors and businesses that depend on the company.

Apart from tax breaks for Sears and CME Group, Inc., the bill also included a tax incentive package of $3.5 million for UCI International Inc. In return, UCI is moving its corporate HQ to Illinois, investing $4 million in the state, creating 250 new jobs and retaining another 1000 jobs at its Champion Laboratories unit in Albion.

Sears has received relocation offers from other states, and is supposed to decide on it by the end of the year. Sears has made a net direct investment of $675 million in Hoffman Estates and the EDA since 1992, and it has been an iconic Illinois-based brand for 125 years. But they may still decide to move out, which would devastate Hoffman Estates.

Illinois would lose 15,000 jobs and $213 million in annual direct tax revenue from Sears, and a lot more from other businesses down the line, with a negative $2 billion impact on the economy. That cannot possibly be good for D300 even if the EDA ceases to exist and taxation levels go up.

Chasing Apple for Economic Development

With the opening of a giant 23,000 foot Apple Store in Grand Central Terminal last week just in time for the holidays, New York now has five Apple Stores. That ties the Big Apple and London as the only two cities with five Apple stores each – more than any other city in the world.

Apple Store in Grand Central Terminal, NYC

Photo credit - jcn (flickr)

That’s no mean achievement either, because Apple Stores are turning into anchors for affluent downtown areas, says Robert Gibbs, author of ‚ÄúPrinciples of Urban Retail Planning and Development.”

Gibbs told Forbes magazine that an Apple Store in the area boosts business in nearby stores by 15 to 20 percent.

He adds that Apple carefully chooses what city and location it wants to do business in. Gibbs adds that cities should stop chasing sports stadiums and go after Apple stores.

There’s no need to look hard for why Apple chose Grand Central for its 5th NYC outlet. The statistics for Grand Central:-

– 750,000 daily commuters with a mean household income of $95,800 per year.

– 326,000 office workers in the area earn more than $11.3 billion per year.

– 21 million visitors from outside NYC with a mean income of $62,000 per year.

What a host city gets from Apple is equally impressive. Taxes, new jobs and investment for new stores are the most direct benefits, with the halo effect cited by Gibbs adding considerably to the economic impact of a new Apple Store.

Apple’s average revenue per store is $43.3 million, and 300 million people have visited the 361 Apple Stores in 11 countries last year alone. Apple’s 2012 outlay for stores (including 40 new stores) is $900 million.

The Apple Store in Grand Central Terminal alone could generate $10.2 million a year in sales tax revenues, not to mention the new jobs created for its 315 employees.

But some cities apparently don’t yet know it’s better to chase Apple instead of stadiums. Or ashes, for that matter. Legislators in Virginia are debating offering a tax deduction for space burials to provide a boost to the Mid-Atlantic Regional Spaceport.

On the other hand, it turns out that Virginia is probably the only state in the US which has turned down an Apple request to open a new store. A landlord in Alexandria, VA refused to rent her store to Apple because she thought it was a “flakey” company. The city did not step in to intervene.

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