Cool ED Site

I would encourage those of you interested in using the Web for economic development to look at the site created by the North Dakota Department of Commerce. It contains a very cool commerce Internet mapping tool.

Website link.

SEDC Tracks Business Investment

For some time, the Southern Economic Development Council (SEDC) has tracked business investment activity in its member states. I find this to be a very useful activity and would encourage other U.S. regions to do the same. It helps create a positive picture of communities and states from an economic development standpoint.

Link to SEDC newsletter containing business investment data.

Asset Poverty

Most of us are accustomed to thinking about poverty in income terms. There is another way to think about the problem--this is "asset poverty."

According to a report by the Corporation for Enterprise Development (CfED), we need to give more attention to the importance of assets as a measure of poverty. The report says "Assets matter. Assets mean economic security. Assets mean mobility. Assets mean opportunity."

Here are a couple major findings from the CfED report:

1. In all states, except New Mexico, the asset poverty rate is higher than the income poverty rate.

2. Iowa has the lowest level of asset poverty—reporting a rate of 14%—but in 32 other states, asset poverty rates exceed 20% of their total populations. In New York, where asset poverty is the highest, it is estimated that almost one third of New Yorkers do not have sufficient net worth to live for more than three months at the federal poverty level without other support.

What are some variables used to measure asset poverty? They include:

* Home ownership.
* Educational attainment.
* Bank assets.
* Credit worthiness.
* Insurance/asset protection.
* Personal net worth

This is a meaningful concept that deserves our attention. Economic development strategies should work to raise the "asset wealth" of people and businesses. It's not enough to simply work on increasing wages or attracting higher-paying jobs. Economic developers should be coupling our existing income generation strategies with asset creation.

Report link.

Networks and the Internet in Plain English

Looking for some straight-forward definitions of the Internet and the computer world and how they relate to business, and yes also economic development? Check out this page on the U.S. Department of Commerce website.

War Costs and Their Impact on Future Productivity Growth

The following quote from a recent Economy.com analysis is worth keeping in mind. It concerns the impact of the costs of paying for the War in Iraq on future U.S. productivity. This is a subtle, but extremely important issue to bear in mind.

"When the government borrows money, it taps into the pool of available savings, potentially making it harder for private borrowers to fund their investments. To the extent that government deficit spending is focused on consumption rather than investment goods, public expenditures do not offset the future productivity losses that result from less private capital accumulation. While the supplemental wartime budget request amounts to only a drop in the bucket of the total federal debt, the consumption of goods and services constitutes much of wartime spending, leading to a relatively large effect on future productivity."

Link. (If you subscribe to Economy.com.)

Can Regions Profit From Nonprofits?

According to the Albany, NY region, nonprofits can be growth generators. That is the conclusion of a new study released by nonprofit leaders in the area. The report says nonprofits are a $4 billion growth industry that cares. Nonprofit organizations are seen as a growth engine driving the regional economy, accounting for $7.8 billion annually in direct and indirect economic activity. Equally important, nonprofits were found to play a crucial role in health care, education, cultural activities, and other services.

How does this report strike you? It does not sit too well with me. Maybe I am missing something here. I'm not so sure I would be touting the nonprofit sector as my leading target industry. Is the nonprofit sector important to local economies? Of course it is, but does it make sense to actively promote it as your leading growth engine? Hardly. By the way, I would say the same about the role of government in local economies. Government plays an important role as a strategic service provider, but it should not be your leading growth industry.

Is there a better way to look at the role of nonprofit organizations in local economies? Yes. I think a better way would be to explain why the nonprofit sector is growing and how this growth fosters growth in the private industries located in the region. One could argue the economic importance of a region's educational sector. One could argue that nonprofit science and technology centers are catalysts for technology-based economic growth. These are reasonable claims.

One issue to watch for is allowing the nonprofit sector to crowd out private enterprise from developing. The nonprofit should not be a subsidized version of what the marketplace can and should provide. After a while, all this begins to sound strangely like state-owned enterprise, which is becoming a dying race in many parts of the world.

Article link.

Texas Businesses May Be Paying More Taxes

Texas businesses pay 54 percent of all taxes collected in the state, a much higher tax burden than most other states, according to a study by the Council on State Taxes (COST).

California, Massachusetts and Virginia, which often compete with Texas on the economic development front, average a tax burden of 37 percent, the study indicates. The national average is about 41 percent, according to testimony provided by the Washington, D.C.-based Council on State Taxation at a legislative committee hearing in Austin this week.

Visit the COST website here: http://www.statetax.org/.

Go here for more details on the Texas tax situation:

German Hanover Trade Fair Will Probably Suffer from War, SARS and General Economic Woes

The Hanover Trade Fair kicked off this week. The 6,000 exhibitors at the Fair are worried about the low attendance and weak buying interest seen during the Fair's first couple days.

The Fair has experienced declines in both exhibitors and attendees over the past several years as marketers and buyers have moved to other methods of doing business, including the Internet.

In past years, many local and state economic development organizations have exhibited at the show to gain attention from international companies that may eventually seek facility locations in their countries. I recall being a part of such missions back in the early 1980's. While it is not known how many EDO’s are participating in the show this year, my estimate is that far fewer from the U.S. at least are there because of the war and economic problems at home. More are also questioning the effectiveness of trade fairs as a source of economic development leads.

To many, the Hanover Trade Fair is a legendary institution. To many others, it is rapidly becoming a thing of the past, sorely in need of re-invention. Trade shows, like most things, have struggled in the past three years. How will they fare once the economy gains more steam? Will they return to earlier levels of popularity or will they morph into some new and better? The central question that most economic developers are asking is can they be re-done to make them a better source of business investment prospects.

Go here to read more about the Hanover Fair.

Will Nations Not Supporting the War Pay a Financial Price for Their Non-Support?

First, it was the Canadians saying that they were being boycotted by U.S. businesses for not supporting the Iraqi War. Now, the Germans are saying they fear the same thing. In this case, German companies are worried they might be precluded or overlooked as contractors for the cleanup effort in Iraq after the war. Thus far, the Germans report they are aware of only a few instances where German companies have been slighted by American companies, but some concern remains about this issue.

This is indeed a delicate issue for U.S. business and government officials.

What does this issue mean to the economic development community? Should we discourage foreign direct investment from those nations that did not support the war effort? That would include all but the U.K. and Australia. Should we discourage trade development with these international markets? Can you think of an economic developer who would turn away a new Mercedes Benz plant?

On the surface, I see major problems with isolationism and removing ourselves from the global economy. One could argue that such withdrawal could injure U.S. consumers and businesses over the long run by limiting the selection products and services we buy. Can we trust American companies to hold the line on prices in exchange for a Buy American policy? I will leave that question to you to answer for yourselves.

Is it likely that some U.S. companies supportive of the war effort will use this as an opportunity to send a message to their foreign suppliers for not supporting the war? I think that is entirely possible. My question is how long will they beat that drum.

What are companies in your community saying about this issue?

Article link.

Female Workforce Growing in Louisville

Louisville-area women entered the work force in record numbers during the 1990s, helping to drive the greatest job growth in the area's history, according to a study from the University of Louisville released yesterday.

The study was prepared for Kentuckiana Works, a local work force development agency. One major finding of the study is that the proportion of adult men holding jobs did not change much in the two decades since 1980. But the employment rate for women rose 13 percentage points — from about 45 percent to 58 percent.

Article link.

Tribes Couple Theme-Based Attractions with Gaming

The addition of water parks, gas stations and miniature golf courses near Indian casinos can lengthen stays and generate more money for tribes, officials said at a national Indian gambling conference this week. Experts say that theme-based attractions are part of a wider trend in the casino industry which made more than 50 percent of its profits from non-gambling sources in 2002.

Go here to read more.

Encourage Kids to Pursue Science and Technology Careers

It's never to early to expose children to science and technology. What child doesn't ask the eternal "why" question or "how does it work?" There are many useful resources available to help kids gain an early understanding of science and technology. For one, the Department of Commerce's Office of Technology Policy has a program called GetTech. You can learn more about it GetTech by simply clicking here.

This may be one of your best long-term strategies for combating brain drain--that is to always have a steady stream of new minds focused on science and technology issues.

New State Science and Technology Report Released

The Department of Commerce's Office of Technology Policy (OTP) has just released its 3rd annual report on state science and technology indicators. This is a must read for all of you working on technology-based economic development. In this day and age, that's everyone. Right?

So, what does the mammoth 3-volume report say? Here are just a few interesting observations about the report.

First of all, the report is based upon the Bureau of Labor Statistics (BLS) new definition of high tech industries, using the NAICS classification system. What's NAICS? It stands for the North American Industry Classification System, which is the new updated system replacing the old SIC (Standard Industry Classification Code) system.

Second, the report contains interesting and thought-provoking input and outcome metrics for measuring science and technology activities related to the economy. We have been measuring inputs for a long time, but data on outcomes has been more scarce. Both are important, and of course if you are concerned about productivity then you want to know how we are using inputs to produce outcomes.

Third, total performed R&D spending was $245 billion across the 50 states, which equals $24.54 per $1,000 of gross domestic product (GDP). Why is this important? It is important because R&D is a leading driver of economic growth in a technology and knowledge-based economy.

Fourth, which states had the highest total R&D spending per $1,000 of gross state product (GSP)? The top performers were:

* Michigan, $58.06.
* New Mexico, $56.75.
* Washington, $47.81.
* Maryland, $46.39.
* Massachusetts, $45.64.
* Delaware, $42.46.
* Rhode Island, $41.18.
* California, $40.97.
* Idaho, $38.32.
* New Jersey, $36.17.

Note: this is a measure of the R&D intensity of state economic output, it is not a measure of the dollar amount spent on R&D. An entirely different set of rankings would emerge for the latter measure.

Fifth, the report provides science and technology profiles for each state, containing lots of useful information about both the input and output sides of the state's technology economy. For example, Michigan ranks 1st in both total R&D spending per $1,000 of GSP and industry R&D spending per $1,000 of GSP. Meanwhile, the state ranked only 22nd in university R&D spending per $1,000 of GSP and 25th in Federal R&D spending per $1,000 of GSP.

To download the 3-part report, simply click here.

Bullish Economic Outlook Report

Economy.com just issued its latest global economic outlook and it sounds good--maybe a little good.

Here is what the outlook has to say: "With the first quarter behind us and an end to the war in Iraq in sight, it is time to consider the nature of the rebound in the global economy expected in the second half of this year. The U.S. is expected to lead the worldwide recovery with a rapid acceleration in real growth during the second half of 2003 that induces stronger growth abroad in 2004."

The revised global outlook has the world economy gaining 0.3 percent this year (2.1% growth rate), which is only half its 0.6 percent growth last year. Business investment is expected to strengthen more than consumer spending throughout the rest of the year.

Business spending is already showing signs of improvement in the United States, which is illustrated by many of the stories in ED Futures this week and last. As we have been saying for sometime, we here at ED Futures foresee a one or two quarter period of catchup growth for companies. Be ready for that time window, because that is when you will see serve business prospects making facility site selection decisions.

In the Euro zone, aggregate investment is still weak, though a recovery is evident in spending on equipment and software. There has been some pickup in Japanese capital spending, which is being instigated by a recovery in export-led manufacturing that occurred during the first half of 2002. Because businesses in Southeast Asia did not over-invest in capacity during the late 1990s and, as a result, they are faced with fewer current disincentives to capital spending at this time. Business spending in Latin America will be mixed, with Argentina, Brazil and Chile showing stronger activity while capital spending in Mexico remains weak until late in the year. Argentina is displaying the most impressive turnaround.

Let's keep our fingers crossed that the War in Iraq will culminate soon so things can settle down across the the world. Clearly, this will be the biggest driver to an economic recovery on all continents.

Go here to read more. (Subscription to Economy.com required.)

Tennessee Lands Second Auto Deal

While many states, including Ohio, are debating whether to cut their ED programs, Tennessee is bringing in the deals.

Tennessee officials announced Tuesday the development of a new Bridgestone APM automotive-parts manufacturing plant in Dickson, Tenn., which is expected to bring more than 70 jobs to the area. Last week, state officials announced news of more than 200 new jobs in a new Toyota manufacturing plant in Jackson.

Go here to read more.

Brunei Steps Up ED Effort

Even little Brunei wants to be a bigger player in economic development, and it just might. The country has set its sights on becoming a bigger regional and global financial services hub.

Go here to read about this tiny's country's plans to get a larger piece of the global economic development pie in the future.

New UK Study Says Domestic R&D Paying Off

A new research study by University of Warwick researcher Dolores Anon says that privately-funded research and development (R&D) is vital for improving productivity across UK manufacturing industries. The study does not find any measurable gain from foreign R&D investment done by UK companies.

Anon also found evidence of positive and significant domestic R&D spillovers from R&D investment from other UK companies. However, the results fail to detect any improvements in domestic productivity of UK manufacturing sectors arising from foreign R&D investment.

The study concludes that any benefits to productivity from R&D to UK manufacturing industries come primarily from national, private R&D investment. The researcher says that this should serve as a warning to policy makers against underestimating the importance of domestic technological efforts and overestimating the potential contribution of international spillovers. Moreover, she says that UK companies should not assume that they will be able to benefit either in the short term or the long term from the additional knowledge produced from overseas R&D investment and should instead rely more on their own R&D investment.

What is my take on this research? Interesting findings indeed. I don't doubt that companies get their biggest productivity bang from the R&D they do at home, but that does not argue against non-participation in the international research community. In global industries, such as automotive, chemicals, computers and electronics, companies must support both domestic and international research, especially if they plan for their products to be successfully adopted in international markets. Too bad the University of Warwick researcher did not note that important point--the object of R&D by business is to produce and sell product.

Go here to read more about this article.

U.K. Business Training Budgets Get the Axe

The United Kingdom's Chartered Institute of Personnel and Development (CIPD) just released a study that reveals that more than half of private sector firms reported deteriorating trading conditions in 2002, with 28 per cent cutting training budgets in response, 55 per cent maintaining training spend and 17 per cent increasing it. In the public sector, 38 per cent of employers say the economic outlook has worsened over the past year. Of these organizations, 26 per cent report an increase in spending on training, 54 per cent said it remained steady and only 20 per cent saw a reduction.

While the American Society of Training and Development (ASTD) reports some decreases, they are considerably less than what the U.K. is reporting. A January Gallup poll showed that corporate employers in the U.S. continue to invest in their workers, even during the current downturns.

Go here to read more about the training cutbacks in the U.K.

Quad Cities Cooperate Regionally

Regional cooperation is easier said than done. That was the message in my weekend article on regionalism in economic development. Some areas are making headway in this area.

Take a look at the Quad City area, which includes parts of both Illinois and Iowa. The "region" in this case includes Moline and Rock Island, Illinois and Davenport and Bettendorf, Iowa. For many years, people have had a sense of regional identity because of the cities' shared economic base, the Mississippi River and other factors. The Quad Cities has been working at regionalism for sometime. The road has not always been smooth, but economic development leaders from the area say that regionalism is working.

What I like most about the Quad Cities situation is that it not only embodies inter-city cooperation, but it contains interstate cooperation. I would urge more EDO's to move in this direction. Cincinnati and northern Kentucky understand this. So does Kansas City, Missouri and Kansas City, Kansas. Many other areas across the country are also tapping the advantages of regional approaches that cross state lines.

Go here to read more.

Knowledge Economy Growing Rapidly in Malaysia

Malaysia will need 201,000 engineers by 2010 as it moves towards the K-economy (knowledge economy), according to the country's National Economic Action Council (MTEN).

Here is a closer look at the Malaysian demand numbers. Of the 201,000 engineers needed, 33,000 will be in the civil field (18,000 in 2000), electrical and electronic will need 64,000 engineers, mechanical will require 45,000, and chemical, which has the biggest shortage, will require 29,000 by 2010. According to the MTEN, there is also a great demand in other K-based fields like system and hardware engineering, which will require about 37,000 engineers in 2010 compared with 15,000 in 2000, software development will need 26,600 engineers, and 71,000 business analysts will be needed by 2010.

These are significant numbers, speaking to the expected greater role that developing nations will play in the rapidly emerging knowledge economy in the future. China, India, Korea and other nations also have their sights sets on future growth in this area. All this points to much greater competition for these opportunities in the United States.

Go here to read more.

New Orleans Seeks Ways to Bolster Music Business

When you think about New Orleans, the city's music immediately comes to mind. If the city's music is so good, then why has New Orleans not been able to parlay its musical talent into a significant music industry, such as those found in Nashville or Austin? Several people are asking just that question.

In what supporters call a modest first step toward nurturing a New Orleans music industry, two state legislators have introduced twin bills that would establish an arts and entertainment industry development fund. If created, the fund would provide no-interest loans to small music-related ventures in Louisiana, including recording, publishing, technology and manufacturing companies. Businesses related to live music, including festivals, would not qualify.

Go here to read more.

Massachuetts Looks to New Science and Technology Plan

"Massachusetts must adopt a comprehensive strategy to compete with other states for science and technology jobs," Gov. Mitt Romney told a gathering of business leaders yesterday. Romney endorsed a resolution, drafted by the Massachusetts Science and Technology Caucus, that calls for the state to nurture its existing science and technology resources and help entrepreneurs create new ones

Investing in a new plan will be hard for Massachusetts, given its $3 billion budget shortfall--a story not unlike those heard in other states.

Click here to read more about the topic.

Indianapolis Auditors Descend Upon United

Remember the United Airlines Hub project that hundreds of cities wanted back in 1991? As you know, Indianapolis got the project for a price of $295 million. Now, Indianapolis is sending their auditors in to determine if $34 million in tools and equipment purchased by the company was done so with the incentive money. If so, they want to ensure that the tools remain the property of the airport authority.

This situation is a vivid reminder that public investment in private business is a risky undertaking. State and local governments using public incentives should protect themselves against failed deals like the United project. A host of performance-based tools, including clawbacks, are available to offer some protection. I wrote in a couple earlier articles about the need for greater attention to "risk management" by EDO's. This is essential in the economic development incentives area.

You can read the article about the Indianapolis United Hub project by clicking here.

New Tax-Free Zones Proposed In Minnesota

Maybe you haven't noticed, but many governors are proposing new incentives to keep and lure industry. People are frustrated by the economy and the inability to get state and local economies growing again. Many of the new governors taking office this January have introduced legislation for economic stimulus packages and new economic development initiatives.

Minnesota has a number of new job development proposals on the table. One of Gov. Tim Pawlenty's top priorities this legislative session is to bring more jobs and businesses to rural Minnesota. Pawlenty is proposing 10 tax free zones as a way to entice businesses to move into rural areas. Pawlenty says he likes the Pennsylvania Keystone Opportunity Zone program and it's worth copying in Minnesota. If he has his way, that is exactly what will occur.

Go here to read more.

New Study Says Maybe Clusters Not All They Are Cracked Up to Be

Just about the time you think you have your future economic development strategy figured out, a couple smart guys from the local university do some research that throws a monkey wrench into your plans. That may be how some UK economic developers are feeling at this time as they review the results of a new London School of Economics study that says that clusters may not be the growth driver that they (we) think they are.

According to a paper this week at the Royal Economic Society conference by Gilles Duranton and Henry Overman, from the London School of Economics, we are far from being able to identify specific clusters of activity and what drives them. According to the researchers, do we not have enough knowledge to assess whether attracting these clusters of industries is good for local economic development.

The researchers tested a simple hypothesis about UK industrial location. Their starting assumption is that industrial firms are essentially randomly located, or they have no particular tendency to cluster anywhere in the UK. They then develop a statistical test that is based on the distance between firms to see if it is possible to reject this hypothesis.

Using data on UK manufacturing, the researchers found that only 51 per cent of industries show any significant departures from randomness - that is, any evidence of clustering in their location patterns. Of these industries, only a very small number are highly clustered. What do these findings suggest? They suggest that much of the concentration of manufacturing that exists in the UK is essentially random and may have nothing to do with concentrations of competing, collaborating and independent companies and institutions that are connected by a system of market and non-market links.

What can we conclude about the industries that show some tendency towards clustering? The study shows that this might be caused by both traditional industry location factors and/or by interaction between firms.

The researchers say that, "given our current level of understanding, we cannot distinguish between these two types of explanations. We certainly do not have enough knowledge to assess whether attracting these types of industries is good for local economic development."

The researchers suggest that maybe the role of government policy should be aimed primarily at removing barriers to cluster formation rather than targeting particular clusters. The worry is that non-government supporters of this policy, in particular those who suggest that we can already identify and map clusters, are ignoring or downplaying these difficulties when they present evidence to the government.

What do I think about this piece of research? I applaud the pair for doing this research and would encourage them to continue. Economic development needs knowledge to succeed. As I review the study paper, it strikes me that the research raises as many questions as it answers, which is not all that bad--it makes us think. I would urge researchers to replicate the study in the United States and other countries to see if any patterns emerge across nations. That would appear to make some sense in light of the role clusters are assumed to play in the global economy--an idea germanated by Michael Porter and other academic researchers.

Does this research say you should stop work on clusters? No, but it might suggest that you should give an equal amount of attention to other economic development strategies and not put all our eggs in the "cluster basket." This is common sense advice that I have been giving my clients for some time.

Can you get a copy of the researchers' paper? Yes indeed. Click here and it's yours for the taking.

Biotech Big at North Carolina Universities

Biotech, pharmaceutical and biomedical spinoffs represent more than three-fourths of the economic development portfolios held by the University of North Carolina at Chapel Hill and Duke University in Durham. Why? Because they are home to medical and pharmaceutical schools.

Even North Carolina State University, which has been well known for spawning electronics businesses, is pushing into the biotechnology arena with two startups preparing to spin out. Trying to regain momentum lost since the dot-com demise three years ago, NCSU has overhauled its economic development effort and is beginning to focus on its life science strengths - the veterinary school, crop and timber research, and chemical engineering.

Go here to read more about what North Carolina's major universities are doing in the biotech field.

Wireless Moves Closer

Wireless technology for computing and communication is advancing rapidly and the folks in the Silicon Valley and other technology hotbed places see some major developments on the near term horizon.

According to an article in the New York Times this morning, "the economics of wireless is still unclear and technology standards are not yet in place. Nor does the move to wireless computing spell the death of the personal computer, any more than the rise of the PC meant the demise of the mainframe computer. But as wireless telephony and computing combine, the center of gravity in digital technology is clearly shifting."

"People see the PC as played out, and they are looking for new technology platforms to build new businesses on," said Brad Silverberg, a former senior Microsoft executive who left three years ago and is the founder of Ignition, a venture capital firm that has invested in wireless businesses.

What does all this mean to economic development. Well, here are a couple things you might want to think about:

* Wireless will change the computing and communication technology you use at home and work.It will make it even easier for you to "telecommute" from wherever you are. Wireless technology will impact the "EDO of the future."

* It will change how businesses do business--they will be able to perform their activities in a larger band of of operating environments, including many rural areas that currently do not show up on their business location radar screen.

* The product mix in the Silicon Valley and in other places that produce electronics and telecommunications equipment will change. Will the next generation of wireless products be produced in existing facilities or will new ones be built? That is an important question for existing and emerging tech centers.

* China will play a greater role in the development and production of wireless technology products. The Chinese have been counting on it for a while.

This issue is worthy of your thoughts. It will change how you do business. Stay tuned.

Setting Regional ED Priorities is Challenging

It looks easy until you actually try it. That's what many regional economic development groups are discovering as they work to set future regional economic development investment priorities, especially those requiring public sector support and approval.

The latest region to learn this lesson is Dayton, Ohio, whose Dayton Development Coalition (DDC) had to revise its structure to include five public sector members because of the inability to gain consensus on which development projects should get top billing for federal funding. When the DDC agenda failed to gain sufficient buy-in, the regional chamber and the area's regional planning commission locked arms and formed their own regional priorities agenda. This situation points to a much larger problem afflicting economic development efforts everywhere. Go here to read about the Dayton situation.

During the current environment of scarcity, regional cooperation is more important than ever as a strategy to help communities get what they need to develop and grow. At the same time, regional cooperation is doubly difficult because there are scant public and private sector resources available to fund the growing list of regional development projects.

I have been saying this for some time: economic development is political economy, which means that both political and economic concerns must be addressed to reach a consensus on regional priorities and then to get these priorities funded. This suggests that both the public and private sectors must participate in these priority-setting processes. Several argue that there is no political constituency for regions because politicians get elected within city and county boundaries. That may be true, but local elected officials should support regional initiatives if they want their economic and tax bases to grow. Cities and counties are actors in regional economies. The economy does not start and stop within their boundaries. At the same time, the private sector must recognize that it must be selective in what it asks the public sector to invest in, especially during these current lean economic times.

The economic development landscape is littered with projects originally designed to increase local and regional capacity for economic development. The list includes: convention centers; airport expansions; ballparks and other sports facilities; downtown development projects; waterfront developments; science and tech parks; incubators; interstate highway exit ramps; new regional retail malls; museums and aquariums; entertainment resort developments; new research campuses to support industry cluster development; and many other things. Everybody has a "pet project' that they want to get funded. All promise to restore economic vibrancy to areas. Every economic impact study done on these projects says the project will generate far more benefit than cost.

What do I see as I look at these projects? Most seek and receive large government investments, which often compete for scarce revenues needed to fund basic public services like education and infrastructure improvement. Most project feasibility studies over-promise economic results that never materialize. The market is almost always smaller than what is estimated. Utilization of a large number of these resources, beyond the initial honeymoon period, drops off as fickle shoppers and visitors move on to the next latest and greatest. Most take the attitude that "if you build it, they will come." Most of these projects require public subsidies well-beyond startup and maybe forever.

These problems beset cities and regions of all sizes, but they are especially common in third and fourth tier regions, where the market base is insufficient to support these activities for long. Every city and region wants to be "big league." This desire underlies most strategies guiding urban and regional economic development efforts.

Here is my advice on how to cope more effectively with these issues:

1. Be careful about which projects you add to your regional development priority list. Temper your desire to be a big league city or region at the expense of basic public service.

2. Be careful what you envision about your city or region's future. Sometimes we imagine our cities and regions being more than they really are or can become. It's better to be an over-achiever than an under-achiever. Don't get suckered into believing that you are not a great place unless you have all of these fancy ornaments.

3. Accept at the beginning that you must work incredibly hard at developing and keeping a market for your new developments. In most regions of the country, we have more economic development capacity than we can use. We are overcapacity for tourism and travel destinations. We have too much downtown capacity. Right now we even have under-utilized airport capacity. The economy is always filled with risk and uncertainty, but especially now.

4. Examine the long-term performance of comparable projects across the country to see what is really working and what is not. Invest in a few trips to other cities and ask project planners and managers if their developments are bearing sufficient fruit ten years after they were built. Don't waste your time visiting projects that were just completed in the past couple years.

5. Look at where and how the private sector is investing its funds in these projects. Sort through the financial statements to determine how much private investor money is actually at risk in these projects. Is the private sector taking equal or less risk than the public sector on these deals?

6. Finally, agree that you are going to use two important types of collaboration to increase your success: a) local collaboration in creating market synergy among various developments in your region; and b) external collaboration nationally and internationally to build market ties between your local development projects and those in other cities and regions. The latter idea is new, but has significant potential.

Do these things and ten years from now you will have less worry about whether you made the right decision.

A Lesson in How to Increase Tax Revenues

Who would have believed in 1993 when riverboat gambling was legalized in Indiana that ten years later these activities would be the state's leading business tax revenue source? By 2005, these floating casinos could be paying more in taxes than all of Indiana's major corporations -- including such giants as Eli Lilly and Anthem -- combined. In a recent report that estimated tax collections for the coming two years, state officials predicted that taxes on riverboat wagering would reach $607 million, $26 million more than would be generated in corporate taxes, by the 2005 budget year. This a significant boost to the state's treasury, at a time when most states are struggling to make ends meet.

Despite this considerable growth in gambling taxes, these revenues still are dwarfed by money poured into state treasury from sales, individual income and gasoline taxes. In fiscal year 2002, those taxes totaled more than $8 billion. Casino operators caution state government not to go too far in raising taxes on gambling, which could have the effect of killing the goose that is laying the golden egg.

Some states were early to jump on the gambling boat, while others have either avoided it altogether or have moved slowly in that direction. Regardless of your philosophy of gambling, it is a significant tax revenue generator. The same holds true for Indian gaming, which has increased economic development on reservations across the country.

Go here to read more about the Indiana situation.