US-Israel Science and Technology Foundation

This is an organization you should know about if you are interested in promoting business and economic ties between US communities and states and their counterparts in Israel, especially technology-based cooperation.

The US-Israel Science and Technology Foundation (USISTF) is the funding and administrative arm of the US-Israel Science and Technology Commission (USISTC): a bilateral commission established by the United States Department of Commerce and the Israel Ministry of Industry and Trade in 1994 to foster scientific, technological, and economic cooperation between the peoples of the United States and Israel. The group provides grants to promote and assist with cooperation between the two countries.

Here is the organization’s website address.

Measuring Social Capital

Does the term ‘social capital’ mean anything to you? According to the Community Foundation of Silicon Valley, “social capital, or community connectedness, refers to social networks and the norms of reciprocity that arise from them. A growing body of hard-nosed literature over the last several years shows that social capital, and the trust, reciprocity, information, and cooperation associated with it, enables many important individual and social goods. Communities with higher levels of social capital are likely to have higher educational achievement, better performing governmental institutions, faster economic growth, and less crime and violence. And the people living in these communities are likely to be happier, healthier, and to have a longer life expectancy.”

Now that you know what it is, you might find the Social Capital Community Survey Network website to be a useful tool. Here is the website address.

Is there a correlation between a community’s social capital and its capacity for economic growth? Many researchers believe there is. Here are a couple illustrations of this point. First, consider that today’s economy is driven by knowledge and human capital. That takes people who can relate to one another. Second, consider the fact that a community’s ability to find collaborative solutions to problems and to develop opportunities is important to economic development success. Third, consider the fact that every EDO is competing for the best available leadership to guide its efforts. Fourth, consider the fact that both communities and businesses boil down to people.

I think this is an interesting and important issue that economic development should give greater attention to in the future. For one, social capital is a crucial ingredient in growing clusters; that is people must be able to work together and access each other’s business and economic networks. Businesses belonging to clusters must be parts of each other’s value chains, and to do that, they must trust each other and must be able to partner solutions.

You will be hearing a lot more about social capital in the future. Count on it.

Baltimore Fails to Merge ED Groups

Despite pressure to unite, The Greater Baltimore Committee, the Greater Baltimore Alliance and the Downtown Partnership of Baltimore have decided to remain separate entities with individual presidents and boards.

To strengthen regional economic development, the organizations will form a coordinating committee charged with "achieving savings in the area of common financial and accounting systems, enhancing communication, clarifying individual missions and overseeing scorecards designed to evaluate performance”, according to a report delivered by a consulting group assigned to evaluate the three organizations.

My experience indicates that merging groups of this size and stature is never easy, even if it is the right thing to do. In many cases, mergers of this sort might be the best idea from a resource conservation standpoint, but they are not good for organizational effectiveness. Coordination and collaboration are solutions to many problems in economic development and other areas, but they are not the only answers to performance problems. The first questions I ask in the situation like this is how well are the EDO's performing and what factors have the greatest bearing on their ability to achieve results. Organizational structure or form should follow and support functioning. What are the key economic development jobs to be performed in developing the Baltimore region and then who and how should these jobs be organized?

Some areas, including the Baltimore region, have struggling economies that are not changed easily or transformed over-night. It pays to have a future economic vision, but that vision should be both pragmatic and realistic in line with an area's resources and capacities.

There are some definite bright spots in the Baltimore area's economic base, including its education and research resources, but the region also struggles with cost-competitiveness problems, image issues and many urban problems that simply work against development.

Article link.

Why High-End Retailers Are Not in Indianapolis

The answer is that the city just doesn't have the economic muscle, or a strong enough concentration of high-income residents or the sheer population that high-end retailers want to surround their stores.

Of 100 major U.S. cities, Indianapolis ranks:

• 33rd in retail buying power.
• 38th in total population, 1.6 million.
• 39th in cities with household incomes of $150,000 or more.
• 61st in median household buying power.

According to the retail brokerage firm Colliers Turley, Indianapolis is an average city when it comes to its average household income of $45,574. Of the surrounding major Midwest cities, only Columbus, Louisville and St. Louis have lower average household incomes.

Article link.

Latest U.S. Economic Outlook

What’s happening with the economy? No doubt that is a question heavy on the minds of Bush Administration as they shift their attention to the economy.

According to Economy.com’s latest macroeconomic update, “the U.S. military has been resoundingly successful in meeting its objectives in the war with Iraq, but one of the casualties of that conflict has been the U.S. economy. This is most evident in the nation’s job market. Businesses have resumed reducing payrolls, which, since peaking two years ago, have fallen by well over 2 million, equal to 1.6% of all jobs.”

The current job losses are now comparable to those experienced a decade ago during that recession and jobless recovery. The current job losses are substantially more broad based across industries and regional economies than they were a decade ago. Industries shedding jobs include all of manufacturing, commercial construction, wholesaling, retailing, investment banking, and most recently, state government. Metropolitan areas experiencing measurable job losses include such wide-ranging places as Boston, New York City, Atlanta, Detroit, Kansas City, Dallas, Denver, Salt Lake City, Seattle and San Jose.

The teetering global economy will also remain a burden. Germany and Japan, the second and third largest global economies, are already in recession, and economies as wide ranging as France, Italy, and Mexico are not far behind. Even up until now strong economies, such as India, Korea, and the United Kingdom, are experiencing a marked slowing in growth.

Economy.com expects economic growth (GDP) is the 2.0% range in the second quarter of this year and then improvement to 3.4-3.5% in the third and fourth quarters of this year.

Go here for more information, if you are an Economy.com subscriber.

How Much Would You Pay for the Montreal Expos to Come to Town?

The District of Columbia proposed a $338 million package Thursday in an effort to persuade baseball owners to move the Montreal Expos to the nation's capital. The plan includes $275 million for a new ballpark and $15 million to renovate RFK Stadium, where the team would play until a new stadium is ready.

Washington; Northern Virginia; and Portland, Ore.; are seeking the Expos, who were bought by the other 29 teams before the 2002 season. Baseball officials have said they would like to make a decision on the team's future by the All-Star break in mid-July.

Northern Virginia -- which would build a ballpark in Arlington, Fairfax or Loudoun counties outside Washington -- estimates that a 1997 state law allows it to issue $125 million in 30-year bonds to fund construction.

The Oregon Legislature is considering a $150 million stadium financing package, which was approved 33-25 Wednesday by the Oregon House. It would authorize the use of income tax revenue from players and team officials to help pay for construction bonds that represent the state's part of the estimated $350 million in construction costs.

Stay tuned.

Article link.

New Reports on State ED Budgets and Legislation

I suggest that you take a look at the results of a recent survey of the states by the National Conference on State Legislatures (NCSL) regarding economic development budgets and legislation.

Only 3 states responding to the survey increased ED funding and only 3 saw no substantive change in their ED budgets this year. The rest experienced reductions, which is probably no surprise to any of you.

Website link.

Think About a Unified Development Budget

Most state and local governments grossly under-estimate how much they spend on economic development. Many just count the direct budget dollars that go to their economic development department. There is more to it, and a unified development budget is a strategy for identifying these expenditures in a comprehensive sense.

The Unified Development Budget (UDB) is an annual statement to a legislature or city council with all forms of spending itemized in one place. All tax credits (such as those for investment, job creation, enterprise zones or research and development), all tax exemptions (such as sales and utility tax breaks) and all appropriated spending (such as training, manufacturing extension services, loans and loan guarantees). A unified development budget can also include the development-related portions of infrastructure, recreation and education budgets. With this system, policymakers can see the state's true spending priorities and trends.

This is a worthwhile strategy for adoption if your area really wants to make its ED programs more performance-based and accountable. While a relatively new concept, I think more local and state governments will find the idea appealing, especially in these tight economic and budget times.

Any area using this approach? Texas is for one. Go here to read about the budget enacted in 2001.

Other sources:

1. Texas state statutes for its unified development budget.

2. 2000-2002 Texas ED expenditures budget report.

U.S. House Passes Nanotech Research Budget

The House on Wednesday approved the spending of $2.4 billion over the next three years to foster research into nanotechnology, the science of manipulating single atoms and molecules to create new products.

The legislation, passed 405-19, would fund and coordinate research and development programs in the National Science Foundation, the Department of Energy, the National Aeronautics and Space Administration, the Environmental Protection Agency and the National Institute of Standards and Technology.

Comparable legislation has been introduced in the Senate.

The National Science Foundation estimates that the global nanotech market will be over $1 trillion within ten years.

If the initiative becomes law, how can your area’s businesses, universities and other entities compete for a portion of these Federal research funds?

Article link.

Criticism of ED Spending Abounds in These Economic Times

There have been quite a few stories out there questioning whether economic development dollars are being wisely spent. Take a lesson from the situation in Raleigh, North Carolina, where international travel and other expenditures are being scrutinized. These problems are most common where public money is concerned. My advice is to be careful what you spend your money on and make sure that you can link your budget to your strategy and goals.

Article link.

Connecticut Bioscience Cluster Growing

According to the Connecticut United for Research Excellence (CURE) organization, Connecticut's bioscience cluster invested a total of $3.82 billion in research and development in 2002, compared with $3.61 billion in 2001.

Those figures are in line with a 4.2 percent increase in laboratory space, CURE reported yesterday in its eighth annual economic report. Research and development efforts took up 5.7 million square feet statewide at year’s end, up from 5.54 million square feet.

Employment at biotech companies rose 1 percent in 2002, despite layoffs and belt-tightening at several biotech companies, CURE reported. Biotechnology and pharmaceutical companies employed a total of 16,686 people at year’s end, up from 16,500 in 2001.

Every bioscience job supports 3.15 jobs in other industries statewide, CURE says.

I like the way Connecticut is keeping tabs on its cluster initiatives. A big part of the credit for this effort goes to CURE and to CERC (Connecticut Economic Research Center).

International Council of Shopping Centers

Just about every community has a retail-shopping base. In today’s economy, most are having problems. We get many requests for information about retaining and attracting retailers to communities, especially to downtown locations.

If you are struggling to find answers to retail development questions, you may want to visit the International Council of Shopping Centers’ website as a starting point. It is a useful place to begin your research.

If you are looking for information about major retail companies that are expanding, I suggest that you try the Retail Tenants Directory at: http://www.retailtenants.com/ .

ICSC website address: http://www.icsc.org/

Computer User Dictionary Website

Looking for a simple and straightforward resource to help you understand computer and Internet terminology? I have just the online resource for you. It’s called ComputerUser.com and it is great. This is the place you should go if you want to get a quick definition of something like OSS, which standards for Open Source Software. OSS is software in which the program source code is openly shared with developers and users. You will be surprised at what you can learn from this interesting website.

Website address.

Indiana Strengthens Its ED Programs

To strengthen the state's economic competitiveness, Indiana’s General Assembly passed the following economic development initiatives yesterday:

• Establish the Rural Development Administration Fund with $2.4 million. The Rural Development Council, which will administer the fund, received $1.2 million to find ways to create jobs in rural areas.

• Sets up the Technology Development Grant Fund to establish technology parks around the state. The $4.5 million fund, intended to foster growth of technologies developed in Indiana, will be administered by the Department of Commerce.

• Expand the definition of a "distressed area" to areas with unemployment rates 2 percent above the state average of the past two years, or if a community experiences a sudden spike in unemployment rate of 20 percent. The classification allows a community to capture taxes from a new company and plow the money back into the company's development costs.

• Allocate $1.2 million in airport development for airport infrastructure. Each dollar could attract as much as 18 federal dollars.

• Establish Hoosier Business Investment Tax Credit, a 30-percent tax incentive on capital equipment for business expansions.

• Appropriate $1 million to promote tax restructuring accomplished in the 2002 General Assembly.

• Create the Venture Capital Fellowship Program to help match the Indiana Future Fund with people having graduate degrees and an interest in venture capital. Fellows would help look for investments in technology companies.

• Encourage the Indiana Public Employee Fund and the Teachers Retirement Fund to invest a small portion of their portfolios in Indiana technology companies.

• Streamline certification for raising early stage capital through the Venture Capital Tax Credit, passed in 2002. The $10 million in maximum credits per year for the five years of the program could result in a total of $250 million in additional seed and early stage capital.

• Allocate $5 million over two years to expand fiber-optics to Columbus, Evansville, Fort Wayne, Gary-Hammond, Kokomo, Muncie-Anderson, New Albany, Richmond, South Bend, Terre Haute and Vincennes.

• Put elimination of inventory tax to statewide referendum in fall 2004. The tax would be eliminated for assessments in 2006 payable 2007.

Article link.

E-Commerce Growing

What's happening with e-commerce sales?

According to a recent analysis by Economy.com, now that the shakeout of unsuccessful Internet sales models is done, Internet sales are responding to fundamentals. Internet penetration is strong and acceptance of e-commerce is rising. Growing penetration of high-speed Internet access has certainly helped a great deal, and successful Internet retailers are learning how to best attract customers, and multiple channel retailers are learning how to integrate the Internet with their other channels. As a result, sales growth reached 27% on an annual basis last year after slowing in 2001.

Of the nearly $35 billion market, $26 billion is accounted for by electronic shopping and mail-order houses. Motor vehicles and parts sold $5.7 billion in sales over the Internet in 2001. A comparable sales volume was registered by computer hardware manufacturers.

How can e-commerce help your local companies grow their markets? That is a question more and more EDO's are asking. Think of how e-commerce strategies could help your downtown retailers, which may not receive enough walk-in traffic to stay profitable. E-commerce makes sense as a part of your downtown revitalization strategy.

Article link. (Subscription service.)

Texas Senate Passes New ED Fund

Legislation creating the Texas Enterprise Fund as a means of boosting economic development and increasing jobs was passed by the Texas Senate Monday. SB 1771 creates the fund as an account in the state's general revenue fund and provides for economic and community development, job training and business incentives.

In other changes, the Texas Department of Economic Development would be phased out. The governor's Office of Economic Development, which would assume the duties of the Texas Department of Economic Development, would work with both state and local government. Governmental entities, such as counties and even school districts, would formulate incentives to encourage business and industry to locate in Texas.

Article link.

Fitchburg State Gets with Town-Gown Program

Town-gown partnerships are important to economic development. Fitchburg State, based in Fitchburg, MA understands this, which is why it is working with local community economic development officials to strengthen working ties.

In the words of the City's ED Director: "If someone decides not to come to Fitchburg State College, we don't want it to be because of the city surrounding it," said Fitchburg Economic Development Office Executive Director Michael Lanava.

Article link.

When Liveability and Development Clash

Liveability means different things to different people. That is the lesson to be learned from an emerging conflict in Austin Texas over whose voice should speak on quality of life issues as they relate to the local business climate.

Liveable City is a relatively new organization, working to promote quality of life improvements in Austin. It includes one of Austin's highest-profile environmentalists and two former City Council members--not exactly the type of leaders that local business and economic development leaders would place in charge of the city's quality of life crusade. Liveable City flexed its muscle this year when it was influential in altering a major downtown real estate development, pressuring a national retail store to abandon the project and leading one of Austin's leading public companies to renegotiate a deal for a new headquarters.

This is not an unfamiliar debate in many cities across America. Smart growth, new urbanism, livable cities initiatives and other movements have clashed with more traditional economic development and business interests. The choices are complex, including whether to go with local merchants or invite in national retail franchises. Economic development advocates argue that the livable communities movement has raised design standards for new developments, in some cases adding to review time and development costs. Livable community advocates say that cities have allowed developers and their tenants to compromise local quality of life by developing efficient, but unattractive and poorly constructed buildings that contribute little to creating high-quality urban places.

This is a tough balancing act for many communities. My advice to local economic developers is to look carefully at both what is desirable and feasible in terms of local development. What does the community desire or want? What type of development is feasible for the community? And yes, what is in the community's long-term economic and social interests? We find in our work that citizens are increasingly concerned about their quality of life. It is the economic developer's job to educate people about their development options and the tradeoffs that are associated with these different choices. Future economic development plans and strategies will need to consider and present more--not less--choices for people. What choices does your plan offer your community?

Article link.

Corporate Volunteerism and Giving Down

The slow-growing economy is affecting not only corporate profits -- it's also straining corporate volunteer programs. That is the word from a recent Stamford Advocate newspaper article.

For many years, nonprofit and charitable agencies in most communities have drawn from a pool of of highly educated and skilled corporate employees to provide services to economic development, civic, elderly, and social service organization. But corporations have shed employees to save costs, and those who remain often are less able to volunteer.

According to a recent survey report by the Independent Sector, a coalition of more than 700 national organizations, foundations and corporate philanthropy programs, found that employees worried about their financial futures are 50 percent less likely to volunteer.

Recent studies conducted by Cone, a Boston-based corporate strategy firm, and the Council on Foundations, based in Washington, D.C., found that consumers are more likely to choose and remain loyal to companies committed to social causes.

This news, while not new to most EDO's, points to the need for economic developers to work especially hard at making the case why their organizations should receive corporate volunteer and financial support. You may want to consider the following actions to strengthen your case:

* Be ready with the facts about your organization's accomplishments. Speak directly to the return on investment (ROI) issue.

* Work on retaining existing corporate leadership involvement and ensure that they see the benefit of their volunteered time.

* Coordinate your requests for funding and volunteer leadership on a community-wide basis to ensure that key corporations are not overwhelmed by demands for their time and money.

* Adopt creative approaches to leadership, such as forming leadership teams, co-chair strategies and other approaches that reduce the time demands on your corporate leaders.

* Clearly define your leadership needs so corporate executives understand what you expect from them.

These and other strategies will help economic development organizations sharpen their ability to compete for available corporate leadership and funding.

SARS Continues to Dampen Tourism

First, it was 9/11. Then it was the War in Iraq. Now, it's SARS that is crippling the world tourism industry.

A survey in mid-April showed that more than 90 major corporations had banned employee travel to mainland China. Travel to Hawaii by Japanese visitors was down 23.5 percent in April, and bookings are off 36.5 percent in May and 33.3 percent for June, according to a report from the Japan Association of Travel Agents. Visitors to Chinatowns in New York City, LA and San Francisco are down due to fear on the disease.

Article link.

Industry Definitions Matter

2007 sounds like a long way off, but it's not. That is when the NAICS (North American Industrial Classification System) will do another major update to its classifications.

Two sets of issues should interest economic developers in the 2007 NAICS update. The first is how new and emerging industry classifications will be handled, which will impact a host of areas including the life sciences. Secondly, this may be the timing for synchronization of the NAICS system with industry classification systems used by the United Nations and those used in Europe. The latter development will improve our ability to conduct better research on global industries and various other important issues.

You may want to visit the NAICS 2007 website and review some of the plans being considered. Website link.

Slight IT Rebound

According to Economy.com, the information technology (IT) sector is seeing some improvement. The modest recovery in demand for information technology equipment and software, which began early last year and stalled toward the end of the year, is back on track. Given that geopolitical uncertainty has eased substantially in recent weeks, business confidence has climbed and corporate profits are improving, it is likely that the budding tech recovery will gain steam over the next few quarters.

According to the Bureau of Economic Analysis (BEA), U.S. businesses increased IT investment spending at an 8.4% annualized rate in the first quarter of this year.

Meanwhile, according to the monthly CIO Magazine Tech Poll, which surveys several hundred chief information officers about their tech spending plans, weak profitability and tight financial conditions are the two top negatives affecting corporate tech spending.

Article link (if you are an Economy.com subscriber).

Enterprise Florida Funding Level Remains in Question

Regional economic development leaders, including those from the Tampa Bay area, are increasing pressure on the Florida state legislature to retain Enterprise Florida's funding level. One initiative, ITFlorida, is expected to be held up for funding. The ITFlorida initiative, would among other things, strengthen local communities broadband connectivity and expand the use of e-government services across the state.

Article link.