Economic Development Blog

Economic Development

Ohio Economic Development Compliance Report

Dec 17

Ohio Attorney General Mike DeWine released his 2012 Report on award recipient compliance with state awards for economic development. The report analyzes compliance with the terms of economic development awards for 255 recipients which had performance periods ending in calendar year 2011.

Ohio economic development (photo – ohio.gov)

The report found that 162 awards were in substantial compliance while 93 awards did not comply, resulting in an overall compliance rate of 63.5 percent.

Awards issued by ODSA fall into four main categories – workforce awards, grants, tax credits, and loans. The report listed compliance rates by award categories:-

- Workforce compliance rate: 89.9 percent (80 of 89 awards in substantial compliance);

- Grant compliance rate: 48.6 percent (36 of 74);

- Tax credit compliance rate: 59.5 percent (25 of 42); and

- Loan compliance rate: 42.0% (21 of 50).

Most of the awards analyzed were made by the Ohio Development Services Agency (ODSA) in between 2006-08, and the Great Recession in between then and now may have had a negative impact on the projections, which might account for some of the non-performers.

For example, automobile supplier YSK Corporation was given a $2.5 million loan for expansion in 2006 in return for a promise to create 30 new jobs and retain 236 existing ones. They managed to retain the jobs, but could create only two new jobs.

Similarly, ABC Manufacturing, Inc. received tax credits to create 200 jobs, and managed to create only 53 jobs. Their tax credit term is being reduced from six to four years. ABC also received a $250,000 grant, for which the ODSA has sent notice of clawback of $181,250. They were also given a $750,000 loan under the Pioneer Rural Loan program, and the ODSA has now sent them a notice that it may increase the interest rate due to non-compliance.

But some of it is just about companies not living up to their commitments. For example, Caterpillar, Inc., which received $25,694 for workforce training and committed to training for 2,000 workers, has managed to provide training for just 52 workers. The ODSA sent Caterpillar a notice of clawback of $16,594.

Similarly, Home Depot U.S.A. Inc. received $32,500 under the Ohio Workforce Guarantee program to train 200 workers. They trained only 65.

Read the full report Ohio 2012 economic development compliance report – Download (pdf)

AFL-CIO HIT Investing $33.5M For Low-Income Housing in Boston

Dec 15

The AFL-CIO Housing Investment Trust (HIT) is investing $33.5 million of union pension funds to construct 129 apartments for low-income households in Boston, Massachusetts.

Old Colony existing apartments contrast with new housing (photo – aflcio-hit.com)

The project will be located in Old Colony, one of Boston’s largest and most distressed public housing properties. It is expected to generate 340 union construction jobs.

The new investment is part of the HIT’s “Construction Jobs” Initiative, a national effort to get union construction workers back on the job through investments in housing projects.

Previously, the HIT invested $26.7 million in Old Colony’s $56.8 million first phase of redevelopment, which included 116 housing units and the 10,000-square-foot Joseph M. Tierney Learning Center.

The redevelopment plan is being carried out by the Boston Housing Authority and MassHousing in conjunction with the developer, Beacon Communities of Boston.

This latest $33.5 million investment is a part of the $61.4 million second phase of their plan. The success of the Old Colony master plan and its environmentally sustainable design is being looked at as a national model for reviving older urban communities.

The rehabilitation work is being carried out in accordance with LEED criteria for sustainable development and includes the replacement of aged infrastructure with energy-efficient systems to reduce operating costs.

“The HIT’s investment in the Old Colony redevelopment is part of our long-standing commitment to support the City of Boston in developing and preserving quality affordable housing for low-income families,” said HIT Senior Vice President Tom O’Malley, director of the HIT New England Regional Office. He added that the union-built project “is already helping improve the quality of life for residents, who are enjoying the new environmentally friendly housing and attractive outdoor green space.”

Since establishing the Construction Jobs initiative in 2009, HIT investments of $1.2 billion, together with $59.6 million of New Markets Tax Credits from the HIT’s subsidiary Building America CDE, have generated more than 15,000 union construction jobs across the country. The HIT has now set a new goal of creating 20,000 union construction jobs by year-end 2013.

Three thousand of these jobs have been created in Boston, Massachusetts. The HIT and its subsidiary have financed 10 projects in Boston since 2009, representing $646 million of development and 1,202 housing units.

Pew Report – Creating Fiscally Sound State Tax Incentives

Dec 14

A new Pew Center report analyzes 16 major economic development bills with the potential to be among the costliest nationwide.

Pew report on state tax incentives (chart – pewstates.org)

The study, titled “Avoiding Blank Checks: Creating Fiscally Sound State Tax Incentives,” looked at legislation approved by states between 2007 and 2011.

In only four cases were the tax incentive proposals accompanied by both rigorous fiscal estimates and caps on annual expenditures. Five of the bills were enacted without either of these fiscal safeguards. In seven cases, the legislation lacked one or the other.

The price for tax incentives created without these fiscal precautions has soared in many cases. For example:-

- Louisiana’s tax exemption for horizontal natural gas drillers, passed in 1994, cost the state just $285,000 in FY2007. But the recent discovery of a large natural gas deposit and the swift expansion of horizontal drilling that followed pushed the price to $239 million in FY2010.

- Michigan’s film tax credit, approved in 2008, had no fiscal estimate and no limits on the number of films that could qualify, the amount of each credit awarded, or the program’s annual price. After production companies received credits worth more than $360 million in less than three years, the governor and legislature converted the incentive to a direct grant program and capped its cost at $50 million for FY2013.

The report suggests states need to come up with reliable fiscal estimates so that lawmakers have important projections of an incentive’s effect on state revenue and its economic impact.

Another thing the report focuses on is annual cost controls which give the state certainty that incentives will not throw the budget out of balance.

For example, when Oregon lawmakers sought to rein in spending on the state’s Business Energy Tax Credit, fiscal analysts projected that even if the credit were allowed to expire entirely in 2011, commitments the state already had made would cost $830 million over the next six years.

“States should consistently use these two tools together to ensure that tax credits, exemptions and deductions for economic development are affordable and manageable from day one,” said Jeff Chapman, research manager at the Pew Center on the States. “When policymakers create tax incentives without knowing the expected costs and guarding against economic changes beyond their control, they leave their states vulnerable to budget pressures that are entirely avoidable.”

“Regular evaluations of existing incentives are essential but not sufficient to prevent the unexpected costs these policies can cause,” added Chapman. “Clear estimates and annual spending limits from the outset are the best approach to avoid unnecessary fiscal risk without sacrificing the economic returns of effective tax incentives.”

Read the full Pew Center report – Download (pdf)

Austin Chamber Unveils Opportunity Austin 3.0 Economic Development Strategy

Dec 13

Business and community leaders joined the Greater Austin Chamber and its regional partners as it unveiled the next five year phase of its Opportunity Austin strategy.

Photo – Austin Chamber

The Opportunity Austin business initiative was launched in 2004 and is aimed at fostering job-creating investment in Central Texas.

The next strategic phase of Opportunity Austin (Opportunity Austin 3.0) will focus on initiatives for the economy, talent, and place.

“When we started Opportunity Austin, we were in a downward spiral and responding to crisis. Over the past nine years, we have worked hard and now we lead the country in job growth,” said Gary S. Farmer, Austin Chamber vice chairman for Economic development. “Being in a position of strength, we are able to focus on community issues that make a difference in our region—poverty, transportation, education, wages,” he said. “If we can maintain an environment that embraces economic development, then– and only then—are we in a position to achieve these community goals.”

Since 2004, there have been 254 corporate relocation or expansion announcements including Apple, Facebook, Hanger Orthopedic, Legal Zoom, Samsung, HID Global and Visa. The number of prospects visiting the Austin region were also well above expectations, with 1,115 in the last eight years.

The first five-year plan aimed to create 72,000 regional jobs and increase regional payroll by $2.9 billion. To implement the strategy, the regional business community committed to invest $14.4 million. Since 2004, an estimated 168,500 new jobs have been added to Austin’s regional economy. Regional payroll increased by $8.46 billion.

In between, the second round of Opportunity Austin 2.0, launched in 2009 at the onset of the Great Recession, did not exactly break any records. GAEDC finished slightly below its $21 million fundraising goal for OA 2.0, and the EDC Board decided to cut OA 2.0’s programs related to international marketing and talent attraction.

Opportunity Austin 3.0 is a more ambitious $25 million, five-year (2014-2018) plan. Nearly a third of the funds ($7.8 million) will be dedicated to education and talent development.

The plan is targeting more than eight key industries for future economic development – Clean Technology, Data Centers, Digital Media, HQ/Regional Office, Medical Device/Biosciences, Semiconductor, Software, Wireless, and other IT.

Find out more about Opportunity Austin at austinchamber.com.

Report – Philadelphia CDCs Contributed $3.3B to Local Economy

Dec 12

A new report commissioned by the Philadelphia Association of Community Development Corporations (PACDC) says that Philadelphia, Pennsylvania community development corporations (CDCs) have contributed more than $3.3 billion to Philadelphia’s economy in the last 20 years.

Philadelphia CDC report (photo – pacdc.org)

This is the first-ever study of the economic impact of Philadelphia CDCs, prepared by Econsult Corporation, and was funded by a $50,000 grant from Citi Community Development. For the study, Econsult surveyed 44 local CDCs.

“Until now, the contributions of Philadelphia CDCs have occurred under the radar – largely out of public view. We are thrilled to help shine a light on their incredible contribution,” said Citi Community Development director Don Haskin.

The report shows that about $2.2 billion of the $3.3 billion is the result of direct investment in city neighborhoods through new construction and rehabilitation of homes, commercial and public spaces.

“Philadelphia CDCs are neighborhood anchors that for years have added to the local tax base, increased wealth and sustained jobs,” said PACDC executive director Rick Sauer. “We are pleased that Citi Community Development understands the value of CDCs, and that their partnership gave us the opportunity to give CDCs the attention they have earned.”

Philadelphia CDC investments have resulted in 11,600 jobs, $28 million added to city tax rolls and $680 million in increased wealth for neighborhood property owners by transforming blight. About half of the 11,600 jobs created since 1992 were in construction. Other CDC services have contributed hundreds of millions of dollars to the economy and sustain an additional 3,400 jobs.

The report also found that CDCs have had a $5.1 billion impact on the state’s economy in the last two decades, supporting 37,100 jobs and generating $118 million in state tax revenue. Most of the benefits were concentrated in the five-county Philadelphia area.

On an annual basis, the report says that CDCs invested $179 million in operating budgets to deliver programs for residents such as job training, housing counseling, after-school programs and physical improvements in neighborhoods.

On average, homes near CDC investments are worth $4,000 more than homes in similar neighborhoods not near the investments, a $680 million increase in home wealth citywide. If these investments had not occurred, the resulting decrease in the Philadelphia’s property tax base would have reduced the city’s property tax revenue by $4.6 million per year and the school district’s by $5.6 million per year.

“In a time where funding is lean and needs are great, CDCs effectively use support from the City to create jobs, develop affordable housing, and invest in the future of our neighborhoods and our people,” said Philadelphia Mayor Michael A. Nutter.

Read the full report – “COLLECTIVE STRENGTH: The $3.3 Billion Impact of Philadelphia Community Development Corporations” – Download (pdf)

NY Regional Council Awards Presentation on Dec 19

Dec 12

The Second Annual New York State Regional Economic Development Council (REDC) Awards Presentation will be held at 10 a.m. on Dec 19, 2012. A total of $762 million in economic development project grants and tax breaks will be awarded to the ten regional councils.

NY Regional Council awards presentation (photo – regionalcouncils.ny.gov)

Same as last year, the event will be held at the Empire State Plaza’s Hart Theatre in Albany, NY. Governor Cuomo will be hosting, with CNBC’s Closing Bell anchor Maria Bartiromo as a special guest.

Each regional council has submitted its list of priority economic development projects that it wants funded. Each regional council also had to make presentations to the Governor and a panel of judges.

The Governor and his entourage have been visiting each region to take a first-hand look at how last year’s projects are progressing. The presentations were made during these in-person visits.

Last year, the 10 regional councils received $785 million, which included $200 million in competitive grant awards. The four winning councils (Central NY, North Country, Long Island, and Western NY) got $40 million apiece, while the other six shared the remaining $40 million.

This year’s awards include $150 million in capital funds and $70 million in Excelsior tax credits. The total of $220 million in competitive awards has been organized a bit differently, with five $25 million awards are stake.

The aforementioned four winning regional councils will be competing for two $25 million awards. Last year’s six losers will be duking it out to get three $25 million awards. This year’s losers will share the remaining $25 million in capital funds. Each region will also be eligible for up to $10 million in Excelsior Tax Credits to help attract and grow business in the region.

The remaining $542 million that is being allocated will come from state agency programs through the Consolidated Funding Application (CFA) to support regionally-significant economic development projects.

You can read more about the regional councils and see each council’s submitted priority projects at regionalcouncils.ny.gov.

What: NY Regional Economic Development Council Awards Presentation

When: 10 a.m., Dec 19, 2012

Where: Hart Theatre, Empire State Plaza, Albany, New York

$7.3M EDA Grants for Economic Recovery – WEDC NY Gets $500K

Dec 11

Acting U.S. Commerce Secretary Rebecca Blank announced $7.3 million in Economic Development Administration (EDA) grants to Connecticut, New York, Rhode Island, Vermont, and Wyoming, to help communities in those states recover economically from recent natural disasters.

EDA Recovery (photo – eda.gov)

“The EDA grants announced today will help several communities that suffered extensive flood and other damage to rebuild infrastructure that is crucial for strengthening their local economies,” said Secretary Blank.

These grants are beings sourced from the $200 million appropriation made by Congress to EDA to help communities that received a major disaster designation in between October 1, 2010 and September 30, 2011 with long-term economic recovery and infrastructure support.

One of the grants announced is a $488,000 EDA investment in the much-lobbied for Women’s Enterprise Development Center (WEDC) to fund the establishment of a Hudson Valley satellite office of the WEDC at the Hancock Technology Center at Marist College in Poughkeepsie.

“This is an incredibly important investment to attract new businesses and jumpstart economic development in Hudson Valley communities that are struggling to recover from natural disasters,” said U.S. Senator Kirsten Gillibrand, who advocated for this funding in October at OXYVITA in New Windsor. “We need to do more than just get back to where we were before these storms. We need a long-term strategy to strengthen our economy, open more businesses and create more jobs so the Hudson Valley can thrive for years to come. This targeted investment can help us – by equipping more entrepreneurs with the resources they need to turn their good ideas into growing businesses.”

The new WEDC satellite center at Marist College plans to offer dislocated workers — unemployed due either to natural disasters or a challenging economy — viable economic livelihoods as entrepreneurs.

“Our primary focus has been in Westchester County and we now are eager to set up a Mid-Hudson Valley satellite office at Marist College where we can reach the growing number of small business owners in that area to help them grow successful enterprises,” said WEDC executive director Anne Janiak.

The Central Connecticut Regional Planning Agency is getting $170,742 for the development of a disaster resiliency plan for central Connecticut, which was severely affected by Hurricane Irene in 2011.

The CT study will identify vulnerabilities in the region’s power generation and transmission systems, transportation network, and flood control improvements, and will develop a plan for a prioritized, coordinated response to future disasters.

In Rhode Island, a $6 million EDA grant to the Quonset Development Corp. and the Rhode Island Department of Transportation will fund reconstruction of the Zarbo Avenue Bulkhead at the Quonset Business Park in North Kingston. According to grantee estimates, the EDA investment will retain or create more than 100 jobs and generate $4 million in private investment.

Nike Expansion Forces Special Legislative Session in Oregon

Dec 11

The Oregon Legislature will meet in Special Session on Dec 14, 2012 to consider authorizing Oregon Governor John Kitzhaber to enter into agreements with companies committing to significant job growth and investment in Oregon.

Nike Oregon (photo – nike.com)

The special session was apparently called by the Governor due to the urgency and importance of keeping and adding Nike jobs in Oregon.

“With legislative action this week, Oregon can secure high wage jobs and hundreds of millions of dollars of new private investment in the next five years,” said Gov. Kitzhaber. “In fact, Nike is ready to commit to a significant expansion of its Oregon operations if the state can provide certainty we won’t change tax rules after they make a new investment. It’s an easy call and a perfect fit with our strategy to attract and retain companies that create jobs and boost per capita income.”

This carrot and stick approach by Nike, which has told the Governor that other states have been angling for the expansion, has forced the state to consider passage of a new bill called the Economic Impact Investment Act of 2012.

At stake is the proposed Nike expansion, reportedly involving a $400 million investment and more than 2,000 permanent new jobs, which would be a huge win for any state.

A recent analysis by AECOM, a global professional services firm, estimates the economic impact of a potential expansion to be more than $2 billion a year and more than 12,000 jobs by 2020 (direct, indirect and induced). Construction alone accounts for about $440 million and more than 2,900 jobs.

If approved, the Economic Impact Investment Act would empower the Governor to enter into qualifying investment contracts with any company committing to a minimum of 500 jobs and $150 million in capital investment over five years.

“Private sector job growth is driving Oregon’s economic recovery, but state government has an important role to play in helping create a business climate to accelerate that growth,” said Oregon Business Association president Ryan Deckert. “We’ve been focused on finding ways to boost wages, and the Economic Impact Investment Act will be a powerful tool to drive per capita income up in Oregon.”

The fact that the Governor had to call a special session weeks before the legislature was scheduled to meet anyway is indicative of the fact that it’s crunch time, and Nike is close to making and announcing a final site selection decision on the matter very soon.

Beaverton, Oregon-based Nike, Inc. (NYSE:NKE) is the world’s leading athletic footwear and sports equipment manufacturer, and has 44,000 employees around the world. It was founded in Oregon, and is one of the two Fortune 500 companies with headquarters in Oregon.

The $653M Impact of the Arts in Connecticut

Dec 10

The Office of the Arts in the Connecticut Department of Economic and Community Development (DECD) has released a report on the economic impact of the nonprofit arts and culture industry in the State of Connecticut.

Arts & Economic Prosperity IV (photo – artsusa.org)

This report is a CT-specific version of a national report – Arts & Economic Prosperity IV, published earlier this year by Americans for the Arts, an organization that supports the arts and culture through private and public resource development.

The report says that the non-profit arts and culture industry generates $653 million in total economic activity. This includes $455.5 million spent by nonprofit arts and culture organizations, and an additional $197.5 million in event related spending (not including ticket sales) by their audiences.

This spending supports 18,314 full-time equivalent jobs, generates $462.5 million in household income to local residents, and delivers $59.1 million in local and state government revenue.

Arts & Economic Prosperity IV uses input-output analysis to measure economic impact and track how many times a dollar is “re-spent” within the local economy. Data was collected from 329 eligible nonprofit arts and culture organizations in the State of Connecticut. Each provided detailed budget information about more than 40 expenditure categories.

As per the report, a total of 33,379 volunteers donated a total of 1,130,534 hours to the State of Connecticut’s participating nonprofit arts and culture organizations. This represents a donation of time with an estimated aggregate value of $24,148,206.

The 329 participating nonprofit arts and culture organizations in the State of Connecticut reported that they received in-kind contributions with an aggregate value of $9,536,555.

The report’s conclusion – “By demonstrating that investing in the arts and culture yields economic benefits, Arts & Economic Prosperity IV lays to rest a common misconception: that communities support the arts and culture at the expense of local economic development. In fact, they are investing in an industry that supports jobs, generates government revenue, and is a cornerstone of tourism.”

The Arts & Economic Prosperity IV study was conducted by Americans for the Arts to document the economic impact of the nonprofit arts and culture industry in 182 communities and regions representing all 50 U.S. states and the District of Columbia.

Nationally, the industry generated $135.2 billion of economic activity—$61.1 billion by the nation’s nonprofit arts and culture organizations in addition to $74.1 billion in event-related expenditures by their audiences.

This economic activity supports 4.1 million full-time U.S. jobs. The industry also generates $22.3 billion in revenue to local, state, and federal governments every year. This is much more than the collective $4 billion the industry gets in arts allocations.

“Understanding and acknowledging the incredible economic impact of the nonprofit arts and culture, we must always remember their fundamental value,” says Robert L. Lynch, president and CEO, Americans for the Arts, in the report preface . “They foster beauty, creativity, originality, and vitality. The arts inspire us, sooth us, provoke us, involve us, and connect us. But they also create jobs and contribute to the economy.”

Read the full Arts & Economic Prosperity IV study – Connecticut edition (full U.S. report).

$81M Tech City Revamp in London Attracts Global Tech Giants

Dec 07

U.K. Prime Minister David Cameron announced a major government investment of £50 million ($81 million) in Tech City. The funds will be used to regenerate the Old Street roundabout, which will see it transformed into Europe’s largest indoor civic space, dedicated to start-ups and entrepreneurs in East London.

Tech City, East London, UK (Photo – number10.gov.uk)

Statement by Prime Minister David Cameron – “The UK is in a global race and I am determined that we as a Government continue doing everything we can to equip the UK to compete and thrive in that race. As well as backing the businesses of today, we are creating an aspiration nation and also backing the innovative, high-growth businesses of the future. That’s why we’re investing in creating the largest civic space in Europe – a place for start-up companies and the local community to come together and become the next generation of entrepreneurs.”

The PM’s announcement was supported by a string of private sector investment announcements to help grow startups in Tech City.

Cisco, DC Thomson and UCL are opening IDEALondon, an innovation center to support the growth of digital and media companies. The facility will host up to 25 digital and media companies.

Microsoft is establishing a Technology Development Center in the heart of Tech City as part of their commitment to the cluster. They will create packages of support for Developer Apprentices and are working on a new Apprenticeship to support young people in and around Tech City.

Also joining the Tech City support band-wagon are IBM, Salesforce.com, KPMG, Barclays, Ravensbourne, Alert Me, and Skills Matter. The latter is an organization that supports a community of 35,000 software professionals with the skills required to write better software.

They announced a $5 million investment by Beringea to provide more opportunities for its community to collaborate with the world’s top technology experts. BlackBerry maker RIM also announced a partnership with Skills Matter to establishment of a test and porting center for developers.

“The time is right to lay solid foundations in Tech City for London’s digital revolution, and this list of major new firms committing to the area is a testament to the confidence leading tech entrepreneurs have in the capital,” said London Mayor Boris Johnson.

Google, Intel, Amazon and Yammer are among the companies that have set up shop in Tech City in 2012. Back in June 2012, the Silicon Valley Bank opened its first United Kingdom branch. Vodafone is opening xone, a new technology lab and incubation center. All put together, the Tech City Map shows over 1300 companies in the cluster.

“We have a vibrant community here full of exciting emerging businesses that are growing alongside some of the world’s most respected tech companies,” said Joanna Shields, incoming TICO CEO. “We have the opportunity to take this momentum and make Tech City the global leader in tech innovation and the location of choice for start-ups and growth businesses.”

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