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BBA Economic Digest: The Threat of Irrelevance

The Threat of Irrelevance

As many local governments face substantial tax revenue shortfall, I suspect we're going to see more economic development positions and perhaps even entire departments eliminated.

Witness Adrian, Michigan, where the city commission recently voted to eliminate the city’s economic development coordinator position held by Chris Miller since 2010.

The commission intends to reallocate the funds and hire a second code enforcement officer in Mr. Miller's stead.

The cut came as Adrian, along with municipalities around the state, grapple with what is expected to be a shortfall in state revenue. Mr. Miller called the decision “stunning” and said he was notified July 2. “It was completely out of the blue.”

My take: I do not know Mr. Miller but do wish him well. His dismissal during this time of economic uncertainty underscores what I see as the threat of irrelevance or rather the perception of irrelevance. That in itself should spur economic development organizations to consider new ideas and trying new things.

And in many cases it has. The importance of survival of small businesses within a community during pandemic is now recognized by many EDOs as a primary mission and they are coming up creative ways to meet the needs and challenges. Props to Denton County, Texas, which has launched Phase II of a grant progam making $20 million available to businesses that have been negatively impacted by COVID-19. Think about it: $20 million from one county.

The Fairfax County Economic Development Authority in Virginia has hosted two virtual job fairs that connect job-seekers with companies. One targeted tech professionals that drew more than 800 attendees, and another for recent college graduates that drew more than 900 attendees. FCEDA plans to host a virtual career fair for obtaining internships in early fall.

FCEDA has also partnered with other organizatios to provide free legal assistance to small businesses in Northern Virginia during the COVID-19 pandemic, including help with federal assistance, grant and loan programs, leases and employment issues.

Will failure result by trying new things? Absolutety. But by not trying, where does that leave you? In the end, we will only be remembered for what we have done.

Tired of the Charade

For many economic development organizations, business recruitment remains their primary focus. But if they were to analyze new job creation over the past 20 years in their communities, they would find that the overwhelming majority come from incumbent businesses.

It reveals not only misplaced priorities, but a refusal to recognize who their primary customer is -- the existing business community, as it has the most effect on people's lives in any given place. Outside prospective investors -- tire kickers -- are secondary customers who become primary customers if and only if they become a corporate citizen of the community. And yet economic developers put time, resources and money into wooing site consultants, some of whom have not worked a project in years. Of those who are active, many base their fees on incentives awarded/accessed, a model rife for abuse because of built-in conflict of interest. Economic developers are complicit in this. I'm tired of the chirade. For the record, I do not want economic developers to think of me a site consultant. While BBA does offer location analysis to companies, we don't do a lot of it. The truth is that the odds of BBA bringing you a project is next to none.

Our primary focus is and remains helping EDOs. So there you have it. Me in my nakedness. Fyi, that's not me pictured above.

Weirdness Prevails

These two very different cities -- Tulsa, Oklahoma and Austin, Texas -- are vying to land Tesla's $1.1 billion "gigafactory" and the battle for the next Tesla plant is getting pretty weird.

Tesla fever in Tulsa has become so rampant that this an oil-industry town has repainted a 75-foot statue called “The Golden Driller" to look something like Tesla CEO Elon Musk, sporting a Tesla logo on its chest and a belt buckle emblazoned with the company’s name. (I'm not making this up.)

Musk visited the Tulsa site on July 3. Tulsa is trying to remake its image with a $1 billion renovation of its downtown, including hip coffeehouses, raft races, jazz clubs and efforts to attract white-collar workers who can work remotely.

Looking to draw tech workers, creatives and other digital nomads, Tulsa in 2018 created Tulsa Remote, a special program that offers $10,000 grants to eligible applicants who commit to living in the city for a year and working remotely.

Austin has long had its “Keep Austin Weird” counterculture image, and it is one of that nation's major tech hubs. Jobs in Austin’s tech industries totaled 161,433, or 15.8 percent of all jobs in 2019, compared to 8.7 percent nationally.

This past week, Travis County, where Austin sits, voted to give Tesla tax breaks worth a minimum of $14.7 million to build the new plant on a 2,100-acre site near the Austin airport on the city's east side. Before that, a local school district, Del Valle ISD, voted to approve Tesla’s plan, dubbed the Colorado River Project LLC. Fans and critics of Tesla spoke at multiple hearings before the district and the Travis County commission in June and July. The Austin metro area has also been one of the fastest growing metro areas in the country for the past decade. The metro area population has grown 3 percent (451,995 people) since 2010. In sheer numbers, its labor force is about twice that of the Tulsa metro area, which could prove important for a network of Tier 1 and Tier 2 suppliers as about 20,000 jobs are up for grabs total.

And because Austin is a center for tech talent, that may prove instrumental for a future corporate headquarters, which Musk has hinted about.

That Which Makes Us Great

Last week, I called upon a mechanic to come to my home to work on my suddenly dead pickup truck.

I had read reviews online about "Hamm," which indicated that he was courteous, competent, and fair in his pricing. He certainly did right by me. Talking with him, it turns out that he is an immigrant from Saudi Arabia, and came to this country 20 years ago for philosophical reasons -- freedom. "It's the greatest country on Earth," he told me. "I've built a successful business here, raised a family. I love it here." I have met many such immigrant entrepreneurs here in Dallas, from countries all over the world. And my first thougtht is why would we want to limit these people coming to the U.S.? They are the epitomy of what this country is, of what it stands for, of what has made it great. A recent American economy study found that immigrants and the children of immigrants founded 45 percent of U.S. Fortune 500 companies, generating $16.1 trillion in revenue in 2018. And yet we increasingly close the door to them. As a result, the U.S. risks losing its long-standing leadership in the tech sector as restrictive laws and a hostile political climate causes highly skilled immigrants to go to more welcoming countries.

Our neighbor to the North, Canada, is taking full advantage of our shortsightedness.

Canada is convincing an increasing number of noncitizen American residents with tech talent to instead settle north of the border.

In a new report by the Center for Security and Emerging Technology found that Canada's Express Entry program prioritizes potential immigrants who score high on work experience and education, as well as other factors. Those who score above a cutoff receive fast track invitations to apply for permanent Canadian residence. The report stated that the number of U.S. residents who are immigrants receiving Express Entry invites to Canada rose 75 percent between 2017 and 2019, more than almost any other country. Bottom line: With the White House is moving to freeze green cards — including the coveted H-1B visas used in the tech sector — Canada is pushing to attract talent across the border.

An Extraordinary Move

The Asheville City Council has apologized for the North Carolina city's historic role in slavery, discrimination and denial of basic liberties to Black residents and voted to provide reparations to them and their descendants. The 7-0 vote came Tuesday night. "Hundreds of years of Black blood spilled that basically fills the cup we drink from today," said Councilman Keith Young, one of two African American members of the body and as reported by the Asheville Citizen Times. "It is simply not enough to remove statutes. Black people in this country are dealing with issues that are systemic in nature." The unanimously passed resolution does not mandate direct payments. Instead, it will make investments in areas where Black residents face disparities. "The resulting budgetary and programmatic priorities may include but not be limited to increasing minority home ownership and access to other affordable housing, increasing minority business ownership and career opportunities, strategies to grow equity and generational wealth, closing the gaps in health care, education, employment and pay, neighborhood safety and fairness within criminal justice," the resolution reads.

Wrote Clark Duncan, executive director of the Economic Development Coalition for Asheville & Buncombe County: “Dean, the focus of AVL City Council on home ownership, minority business ownership, economic mobility etc. are very much in line with the goals of economic development. We are excited about the work ahead and look forward to keeping in touch with you on community outcomes.”

My take: This move differentiates Asheville in ways that may attract future capital investment by socially-conscious companies want to make a difference. I do believe such companies exist and that their ranks are growing. We shall see.

A Marshall Plan for Ourselves

All else pales. In all my speeches to economic development groups prior to the pandemic, I warned of a coming wave of automation and digital technology that would destroy some jobs while altering how and where work is done for nearly everyone. If we look at past economic downturns, we see companies investing in more labor-saving automation to cut costs and increase efficiency. I'm absolutely convinced that COVID-19 will only accelerate that trend. By May, half of Americans were working from home, tethered to their employers via laptops and Wi-Fi, according to a recent study. The rapid change reveals the need for retraining focused on digital skills, which pervades all industry groups. That was my message last week to an economic developer in Alabama. “This is the moment when we should make a significant public investment, when we should have a Marshall Plan for ourselves," David Autor, a labor economist at M.I.T. told the New York Times.

The need for unprecedented investments in our workers is the single most importantant factor to transforming a community. I cannot say that enough.

For much of rural America, this is all about relevancy and frankly whether your community can have much of a future.

What We're Reading and Watching

Historian Jon Meacham on Rep. John Lewis: "He was a genuine saint"

A Search for Hallowed Ground New York Times

How to Tell If You Live in the Suburbs CityLab

The Problem with Solutions Places

History Will Judge the Complicit The Atlantic

1 big thing: The future is shrinking Axios

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