Economic Development

Innovation Tohoku – Google Japan’s Internet-based Economic Development Initiative

Japan’s economic recovery efforts following the 2011 earthquake and tsunami involves all kinds of investment projects and infrastructure rebuilding programs. But there’s also one called “Innovation Tohoku” that focuses on people and the Internet to accelerate economic development.

Innovation Tohoku project - eCommerce for Konno Konpou's cardboard creative designs

Innovation Tohoku project – eCommerce for Konno Konpou’s cardboard creative designs (photo – innovationtohoku.com)

This program was initiated by Google Japan a year ago. The Innovation Tohoku project brought together volunteer Internet experts known as “Supporters” with entrepreneurs and businesses in the Tohoku region to figure out how the Internet could be used to fuel growth.

Ko Fujii, Head of Policy and Government Affairs, Google Japan, explained in a blog post how the program is driving sustainable development.

Some of the Supporters met with the First Lady of Japan, Akie Abe, and shared their experiences of how they used the Internet to help businesses grow even in a harsh business environment.

On the innovationtohoku.com website, there are more than 100 cases listed of businesses that have sought help from supporters for Internet-based growth. There are 35 businesses actively seeking supporters, another 26 that have already been matched with supporters and their projects are currently in progress, and 42 more that have already achieved their goals.

The projects listed include everything from rebuilding as a smart city with a better communication system to revitalizing communities by globally branding local crafts and tourism promotion, and even a crowdfunding platform to support small- and medium-sized businesses in the affected areas.

In the blog post, Ko Fujii highlights the example of Konno Konpou, a family-owned packaging-material company that makes wooden pallets in Miyagi Prefecture. The owner, Hideki Konno, branched out into creative design by making furniture and art installations using corrugated cardboard.

But the market for cardboard dinosaurs and robots in the fishing town where the company is based was limited, until Konno Konpou was matched up with a supporter under the Innovation Tohoku project.

They figured out how to market and sell the products on the Internet to urban audiences using eCommerce, and now Konno Konpou is not just a box-maker, but also an innovative creative design company that attracts customers from far beyond its own town.

Ko Fujii says the Innovation Tohoku approach is scalable, and the lessons learned can be applied to other rural areas in Japan and beyond.

New York Announces $715.9M in Regional Economic Development Awards

New York State announced the third round of the Regional Economic Development Awards in front of a packed audience at the Egg Center for Performing Arts in Albany, NY.

The 10 REDCs were awarded a total of $715.9 million for more than 824 projects.

The breakup of the amounts awarded to each region under the 2013 REDC awards is as follows:-

NY Gov. Cuomo at REDC Awards

NY Gov. Cuomo at REDC Awards

Western NY: $60.8 million

Finger Lakes: $59.8 million

Southern Tier: $81.9 million (Top Performer)

Central NY: $66.9 million

Mohawk Valley: $82.4 million (Top Performer)

North Country: $81.3 million (Top Performer)

Capital Region: $82.8 million (Top Performer)

Mid-Hudson Region: $59.6 million

New York City: $57.4 million

Long Island: $83 million (Top Performer)

New York created the 10 Regional Economic Development Councils (REDCs) in 2011 to help their regions develop long-term strategic plans for economic growth.

The first two rounds of REDC awards through the Consolidated Funding Application (CFA) process in 2011 and 2012 totaled $1.5 billion for more than 1,400 projects, and is helping create and retain an estimated 75,000 jobs.

In Round III this year, all 10 regions were competing against each other for a $220 million part of the total $760 million that was on the table this year. This included $150 million in capital and another $70 million in tax credits.

Out of the $150 million in capital, the five top performers (Southern Tier, Mohawk Valley, North Country, Capital Region and Long Island) won $25 million each, with the remaining five competing for the balance of $25 million.

The ten regions were also competing for a total of $70 million in tax credits, with each region eligible for up to $10 million in tax credits.

The remaining amount was awarded through the CFA process to projects put forward in proposals submitted by each of the ten regional councils.

Find out more about New York State’s Regional Economic Development Councils at regionalcouncils.ny.gov.

CAR Report – Economic Benefits of the Auto Bailout

The Ann Arbor, Michigan-based non-profit Center for Automotive Research (CAR) has released a report which aims to pinpoint the value to the U.S. economy, in terms of jobs and tax revenue, of the federal bailout of GM and Chrysler.

General Motors

General Motors (Photo – america.gov)

They considered two scenarios – one in which the collapse of GM in Jan 2009 would lead to a wider collapse of the U.S. automotive supplier and auto parts manufacturing sector, and another scenario which considers only the loss of GM employment.

Highlights from the report:-

- An industry-wide shutdown trigged by GM and Chrysler’s shutdown would have reduced U.S. employment by 2.631 million jobs in 2009 and 1.519 million jobs in 2010. This includes 238,000 automaker jobs in 2009 (90 percent of industry automaker employment) and 142,000 in 2010.

- A GM-only shutdown scenario would have reduced U.S. jobs by 1.196 million jobs in 2009 and 674,359 jobs in 2010.

Assuming the net cost of the bailout in U.S. Treasury funds is $13.7 billion ($11.8 billion in unrecovered funds from GM and another $1.9 billion loss at Chrysler), the U.S. government saved $105.3 billion under the industry-wide shutdown scenario. These savings are in the form of transfer payments that would otherwise have been required, and from the reduced personal and social insurance tax collections.

Under the GM-only shutdown scenario, the U.S. saves $39.4 billion (334 percent of the projected $11.8 billion in unrecovered funds from GM).

Coinciding with the CAR report’s release, the U.S. Treasury sold its last remaining General Motors Co. (NYSE: GM) shares, and ended up recovering a total of $39 billion out of the $49.5 billion it paid out, resulting in a net loss of $10.5 billion.

General Motors Chairman and CEO Dan Akerson said in a statement that continued investments, innovation, and job creation are just some of the returns of a healthy GM and domestic auto industry.

The report notes that CAR projections show the lost employment would have recovered by 2011 or thereafter even without government intervention. However, the report also says much of this employment would have shifted to the southern United States where the international auto makers are based.

The effect of this job relocation on Michigan and other Midwest states would have been severe.

The report also notes the adverse impact of around 600,000 lost or reduced retiree pensions and health benefits. A majority of GM and Chrysler retirees live in the Midwest states and in retiree states such as Florida and Arizona.

The shutdowns would also have resulted in the permanent loss of automotive research, product development and tooling which would not have been relocated from Michigan to the south, since the international auto makers largely handle pre-production activities in their home countries.

Dr. Sean McAlinden, CAR’s chief economist, who led the analysis, said that CAR is confident that in the years ahead, this peacetime intervention in the private sector by the U.S. government will be viewed as one of the most successful interventions in U.S. economic history.

Read the full CAR report on the “Effect on the U.S. Economy of the Successful Restructuring of General Motors” – Download (pdf)

Congress Considering Bill to Expand CDFI Lending

Rep. Keith Ellison from Minnesota introduced The Small Business and Community Investments Expansion Act in the U.S. House of Representatives.

CDFI Fund

CDFI Fund (photo – nrel.gov)

The proposed legislation (H.R. 3656) seeks to amend the Federal Home Loan Bank Act by allowing community development financial institutions (CDFIs) to use loans they have made to small businesses and community economic development projects as collateral.

CDFIs are certified by the Treasury Department’s CDFI Fund. There are more than 800 CDFIs nationwide.

Back in 2008, as part of the Housing and Economic Recovery Act, CDFIs certified by the Treasury were permitted to become members of the Federal Home Loan Bank (FHLB). This allowed them to raise capital by pledging their existing loan portfolio as collateral.

However, unlike community financial institutions (CFIs), the CDFIs were only allowed to pledge long-term housing loans they had made as collateral. This meant they could not use loans made to small businesses and community economic development projects for raising more funds.

H.R. 3656 proposes that CDFIs that qualify for FHLB membership must be able to use their entire loan portfolio as collateral. This includes loans made to community facilities and charter schools, in addition to loans made to small business and commercial facilities.

This amendment to the Federal Home Loan Bank Act would give CDFIs the same flexibility in collateral as CFIs, leading to greater economic activity in communities and creation of more jobs.

Rep. Ellison said that CDFIs finance affordable housing and community development projects, creating jobs and strengthening local communities. He said this bill would provide them with greater resources for maintaining their work during a painful time of austerity, and would potentially allow them to expand investments.

H.R. 3656 was introduced on Dec 5, 2013 and has been referred to the House Committee on Financial Services. It is supported by the Minneapolis-based non-profit Community Reinvestment Fund (CRF USA) and others such as TRF, Opportunity Finance Network, LISC and the Ohio Finance Fund.

Frank Altman, president and CEO of the Community Reinvestment Fund, said the bill would help CDFIs access a new source of liquidity by allowing them to pledge community economic development and small business loans as collateral for FHLB advances.

Altman said that in this time of uncertainty and budget cuts, innovative financing options like the one championed in this bill were needed for expanding resources for communities that are underserved.

U.S. Launches IMCP Phase II Competition

On Dec 10, 2013, the U.S. Economic Development Administration (EDA) will publish a notice in the Federal Register calling for applications from regions that wish to compete for a designation as one of the 12 “manufacturing communities” under the Investing in Manufacturing Communities Partnership (IMCP) initiative.

IMCP Playbook Flow Chart

IMCP Playbook Flow Chart

The announcement was made by Commerce Secretary Penny Pritzker during her opening remarks at the White House Mayor’s Manufacturing Community Summit.

This is Phase II of the IMCP, and to 12 communities that come up with winning strategies will be designated as “manufacturing communities.”

This designation gives them elevated consideration for $1.3 billion in federal funding and assistance provided through 10 different cabinet departments and agencies.

The communities vying for the designation are expected to present strategies identifying industries and technologies in which they would be competitive in the future and would make investments in areas such as workforce and training; infrastructure and site development; capital access; export promotion; supply chain support; and advanced research.

Apart from the elevated consideration for federal funding, the designated communities will also get a dedicated federal liaison at the agencies who will serve as their concierge, arranging for specific services which they need.

These communities will also be recognized on government websites which provide information about communities’ competitive attributes to prospective domestic and foreign investors.

Lastly, some of the 12 designated communities will be awarded with challenge grants.

Secretary Pritzker said the goal with IMCP is to incentivize smart, comprehensive and integrated economic development planning, and added that they are looking at nothing less than reinventing how economic development is done in manufacturing and other areas.

In the first phase of the IMCP competition, 44 communities were awarded a total of $7 million in planning grants to help them develop plans and strategies that will help them compete in the Phase 2 round.

For instance, the Greater Phoenix Economic Council (GPEC) and Arizona State University (ASU) were awarded a $170,000 grant which they are using for developing a plan to implement an Innovation and Commercialization Center for Advanced Manufacturing (ICCAM) in Greater Phoenix.

ICCAM will help advance the region’s manufacturing sector and make it more competitive for domestic and foreign investments, advance research commercialization, and prepare the workforce for advanced manufacturing jobs.

Participation in Phase 2 of the IMCP competition is not limited to the Phase 1 winners. Applications from participating communities are due March 14th, 2014. Find out more about IMCP at eda.gov.

Houston’s Economic Development Plan: Build a Strong Infrastructure

The Greater Houston Partnership (GHP), a group of more than 2,000 local and regional business leaders in the ten country area surrounding Houston, proclaims the city has everything that businesses need to thrive in the global market place. These needs include a skilled, available work force, superior location, expansive and sophisticated resources, and the infrastructure and transportation channels to support growth and prosperity across virtually all industries.

Texas flag close up

Basic Benefits for Business

Among the myriad of advantages the city offers, GHP lists five primary geographical benefits for new businesses considering Houston as the place to be:

  • Central time zone accommodates communication during traditional business hours from New York to Los Angeles
  • Four seaports available for transport and delivery
  • Two major airports service the region with domestic and international freight and passenger service
  • Mild climate year round
  • Positioned mid-way between east coast and west coast

Attracting and Retaining Major Businesses

While building new partnerships is an important focus for GHP, maintaining strong alliances with current businesses contributes to the city’s strong economic outlook. Part of the expansive breadth of resources for economic development includes state initiatives designed to cement long-term projects.

Shaina Zucker of the Houston Business Journal, reported that Chevron USA, which employs thousands of Houston area residents, plans to build a new tower in Houston to create more space for their growing business. The company plans to hire almost 1800 new employees as part of the expansion.

Funds from a $12 million dollar Texas Enterprise Fund (TEF) award will most likely cover project costs for the new tower, and could be used to defray the cost of recruiting new talent, as the TEF report from Office of the Governor Rick Perry’s site highlights. Funding covers recruitment expenses such as temporary housing, transportation, and relocation compensation packages.

Housing and Employee Benefits

While Texas, and Houston in particular offer a low tax base, economic incentives and a culturally diverse employee pool, there are some that think the city could do more to improve the economic outlook for citizens living in blighted neighborhoods.

Ben Hall, who ran an unsuccessful bid against Houston’s incumbent Mayor Annise Parker, says more could be done to revitalize housing and bring greater employment opportunities to veterans. One of his major campaign talking points was to highlight the need to replace the Tax Increment Reinvestment Zone (TIRZ) policies with new programs to benefit areas that are often labeled as “unsustainable”, according to BenHallforMayor.com. Mr. Hall expressed interest in building new units and repairing existing structures to provide more apartments for rent in Houston. More units would serve current and future residents as new businesses move into the region.

Home values continue to rise, and there are some indications that the number of apartment homes is already growing in bedroom communities. Both positive economic indicators. The 2012 ACCRA cost of living report shows that Houston’s after-tax cost of living in 2009 was lower (roughly 11 percent below the national average) than many metropolitan areas, beating out cities like New York, Dallas and Chicago.

Projections for the Future

If history is any indication, the city will continue to enjoy robust economic growth in the future. With Chevron’s commitment to inject half a million dollars into Opportunity Houston 2.0 to spark innovative business solutions and support economic development, Houston seems to have found a sophisticated approach to sustainable business growth. It’s about mutual fulfillment. When the community supports business growth, growing businesses support the community.

Guest Post: Trevor Wilkins
Trevor is a cultural sponge who writes about his worldly travels.

NYC To Launch $100M Public-Private Life Sciences VC Fund

The City of New York is launching the Early-Stage Life Sciences Funding Initiative as a public-private partnership involving the City, major VC funds and life sciences companies.

NYC Life Sciences Fund

NYC Life Sciences Fund (photo – nycedc.com)

The New York City Economic Development Corporation (NYCEDC), Celgene Corporation, GE Ventures, and Eli Lilly & Company will together co-invest at least $50 million in seed and Series A funding in life sciences startups.

The announcement was made by Deputy Mayor Robert Steel during an event at Rockefeller University.

NYCEDC is putting up $10 million, while Celgene, GE Ventures and Eli Lilly will come up with the remaining $40 million as strategic partners.

The City is seeking anchor venture capital partners and deploy a combined amount of at least $100 million for funding the launch 15-20 new life sciences ventures in New York City by 2020.

Eight institutional VC investors are under consideration from amongst those who responded to the NYCEDC RFP. The first anchor VC will be selected this month to act as a venture capital investment advisor and co-investor.

Additional VC partners are likely to be selected in early 2014, at which time the Early-Stage Life Sciences Funding Initiative is expected to begin making its first investments.

Apart from this $100 million VC fund, the City is also working on establishing a Life Sciences Step-Out Incubator. It will offer at least 5,000 square feet of wet-laboratory space, and may also provide shared equipment, private lab rooms and other services.

The NYCEDC is seeking an entity to develop, launch and operate this incubator with the aim of helping stimulate the early-stage life science entrepreneurial community in NYC.

As per data from the NYCEDC, NYC research projects receive $1.4 billion in NIH funding annually – the second highest in the nation. The New York metropolitan area has more bioscience employees than any other metro.

There are more than 100 venture capital firms already investing in life sciences companies in various stages. NYC’s bioscience cluster includes more than 120 bioscience companies, and the City also has the world’s largest concentration of academic institutions including nine major academic medical centers. With 57 hospitals, New York has the most developed medical infrastructure in the U.S.

Connecticut To Improve Transparency On Business Incentives

Connecticut Governor Dannel P. Malloy signed an executive order that makes information pertaining to economic assistance and tax credits provided to recruit and retain businesses more accessible to residents in Connecticut.

Open Government - Connecticut

Open Government – Connecticut (photo – ct.gov)

The executive order (EO No. 38) directs the CT Department of Economic and Community Development (DECD) to work with the Department of Revenue Services (DRS) for establishing a searchable electronic database on the DECD website.

The website will contain information about all the different state incentive programs used for recruiting businesses and encouraging employers to create jobs.

The DRS Commissioner will additionally provide the DECD with a report that details the aggregate amount of credits claimed in the previous fiscal year, as well as those that are carried forward for offsetting future tax liabilities.

The DECD will use this data to provide on their website a breakup of the type, size and location of businesses that are claiming tax credits.

Gov. Malloy said Connecticut’s taxpayers have a right to know what the state government is doing to promote job creation and economic development, and this directive makes it easier for the public to access this information.

Gov. Malloy added that the directive demonstrates that they are serious about making the state government more transparent, responsive and efficient to private citizens, businesses and policymakers.

State Comptroller Kevin Lembo likewise said the executive order was a significant step toward open government, and would provide policymakers and the public with key information about Connecticut’s investments in its economic assistance programs.

He said the state invests hundreds of millions of dollars each year on tax credits and economic assistance designed for promoting economic development and job growth, and the public deserves to know how these programs are performing.

DECD Commissioner Catherine Smith also unveiled an interactive map of DECD’s statewide investments made through their various programs such as the Manufacturing Assistance Act, the Urban Reinvestment Tax Credit Program, Small Business Express Program, and First Five.

You can see the map at ctopenforbiz.com. It lists recipients’ names, locations, the funding sources under which they received assistance from the State of Connecticut, and the jobs created and retained. DECD is still working on the map, and plans to update it to include other funding sources and the amount of assistance provided by the state.

Baltimore Undertakes Economic Development Strategic Planning Process

The City of Baltimore, Maryland is undertaking a strategic planning process for creating an economic development plan.

Baltimore 2020

Baltimore 2020 (photo – baltimore2020.com)

The process will be led by Austin-based AngelouEconomics, which specializes in strategic economic development and site location.

AngelouEconomics will be working together on this process with the Baltimore Development Corporation (BDC) and the Baltimore Department of Planning.

The aim of the plan is to outline the key steps for enhancing Baltimore’s economic and business climate.

Baltimore Mayor Stephanie Rawlings-Blake said the new strategic plan will provide recommendations for key components of economic growth such as attracting investments, creating jobs and revitalizing Baltimore neighborhoods.

AngelouEconomics has helped create similar strategic plans for Austin (see case study – Imagine Austin), New Orleans and Cincinnati.

Michael Hecht, president and CEO of Greater New Orleans, Inc., says in a testimonial that Greater New Orleans has been ranked as the fastest improving economy in the USA, and credits the analysis and strategy development from AngelouEconomics for creating the roadmap for this remarkable journey of recovery.

AngelouEconomics has also helped Western North Carolina with a five-phase study on growing the clean energy industry in the region. The study was a key component of the “Building the Clean Energy Economy in Western North Carolina” project – a regional collaboration involving 31 counties.

AngelouEconomics was chosen after they submitted a proposal in response to the RFP that BDC put out in April 2013.

As far as the City of Baltimore is concerned, they are undertaking an inclusive process with input sought from residents, community leaders, business owners and other stake-holders. In order to get this input, a number of public meetings and small group discussions are being held at different locations in Baltimore.

The City has also created a website (baltimore2020.com) where citizens can take an online survey and find the latest information and updates about the strategic planning process.

Donald C. Fry, president and CEO of the Greater Baltimore Committee, said this process is a chance for the city to take stock of its existing conditions, chart the future, articulate aspirations and commit to focusing its resources accordingly.

AngelouEconomics has already started conducting interviews and doing research. The Strategic Plan is expected to be completed by March 2014.

Bluelace Crowdfunding Project Hopes to Save American Manufacturing

Launched perfectly right in time for the Black Friday holiday shopping kickoff, the Bluelace Project has a hard to refuse proposition for Kickstarter’s crowdfunding community – spend five dollars to buy a blue “Made in USA” shoelace and save American manufacturing.

Bluelace Project - Made in USA

Bluelace Project – Made in USA

The results are hard to argue with – The project’s stated target was $25,000. As of now, the project has already secured more than thrice the target Р$81,696 in pledges from 6,309 backers. That’s in just one day, with 19 more days to go.

The man behind the project is Jake Bronstein, founder of the New York, NY-based fashion company Flint and Tinder.

This is their sales pitch on Kickstarter – “It’s time American manufacturing got its own Yellow Ribbon Рa shoelace unlike any other Рstrong enough to pull us all together.”

The shoelace, made by Portsmouth, Ohio-based Sole Choice Inc., is literally strong enough to pull a truck. They actually had a strongman (Matt Mills) pull a 13,000lb truck with the shoelace, and have video and pictures of it on the project page.

Flint and Tinder teamed up with ten other made-in-USA brands to facilitate the Bluelace Project.

Bronstein says they launched this project after speaking to several thousand retailers over the past year or so. Most of them seemed to think that customers don’t care about domestically made products that are better, and as a result won’t stock products that are made in the USA, and they’ll never know if customers are willing to give it a chance.

The Bluelace Project page on Kickstarter also informs you that every dollar spent on American made products results in an additional $1.40 worth of spending elsewhere in the U.S. economy.

As far as the shoelace is concerned, here’s how a $5 pledge would be spent:-

- $1 to Kickstarter and Amazon for processing fees;

- $2 to the factory in Portsmouth, Ohio for manufacturing the shoelaces;

- $1 to a warehouse in Henderson, Nevada for packaging;

- $1 for shipping costs, which includes stamps purchased from the USPS and envelopes from a Texas-based manufacturer.

Find out more about the Bluelace Project on Kickstarter.

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