Small Business Research Conference Heads to Cleveland

The Federal Government's Small Business Innovation Researh (SBIR) program is headed to Cleveland October 27-30. It will be a very interesting and worthwhile conference for those of you trying to land more innovation research money for companies in your area.

Here's a list of the sponsoring agencies that will be represented at the conference:

- Department of Agriculture
- Department of Commerce: NOAA/NIST
- Department of Defense: Air Force, Army, Defense Advanced Research Projects Agency, Defense Special Weapons - Agency, Missile Defense Agency, National Imagery Mapping Agency, Navy, Office of the Secretary of Defense, Special Operations Command
- Department of Education
- Department of Energy
- Department of Health & Human Services: NIH, CDC, FDA, AHCPR, HCFA, ACF, AOA
- Department of Transportation
- Environmental Protection Agency
- National Aeronautics & Space Administration
- National Science Foundation
- Small Business Administration

This is your chance to see the Rock and Roll Hall of Fame and other entertaining venues in Cleveland.

To learn more, click here.

Wall Street Without Walls

In 2003, Wall Street Without Walls (WSWW) was funded by the Fannie Mae Foundation to launch a series of orientation and training programs for community-based development organizations, preparing them to access capital markets. The organization works in partnership with the many national trade associations and professional organizations serving the community development field, as well as with capital markets firms. WSWW supports our profession's responsibility to serve the needs of the nonprofit, economic and community development community. It provides opportunities to finance professionals to assist those organizations which have the greatest need yet the least access to Wall Street expertise.

What is WSWW's mission? It is to encourage and facilitate the volunteer's provision of financial technical assistance (FTA) using his or her investment banking and capital markets perspective. Community and economic development organizations with sizable assets and financing needs will have the volunteer's support in thinking through and vetting their financial transactions. WSWW fills a finance skill and expertise gap in the nonprofit sector.

What kind of help can you receive from WSWW? Financial technical assistance includes providing help to individual CDC projects or pool of assets that require the expertise of these professions

- Commercial and Real Estate Financiers
- Low Income and Affordable Housing Finance Directors
- Structured and Asset Backed Finance Engineers
- Corporate and Public Finance Directors
- Emerging Domestic Market Prfessionals
- Receivable, Contract and Future Flow Financing Experts
- Nonprofit 501(c3) Bond Financiers
- Charter School and Facilities Financing Directors

Want to learn more? Go here.

Socially Responsible Investing

What is it? Today, socially responsible investing (SRI) represents the cutting edge of the investment industry – integrating social and environmental concerns while earning competitive returns. SRI has grown from $40 billion in 1984 to $2.34 trillion as of 2001. Of those dollars, $7.6 billion are community investment dollars.

While the SRI industry is experiencing growth in products and real dollars, the increase in sophistication and knowledge of SRI investors has resulted in heightened investor expectations. In addition to screening investments and participating in shareholder advocacy, investors are asking: "How can I maximize the impact of my dollars?” “Where can I make the biggest difference with my money?” The answer for many is community investing.

Community investing is financing that creates resources and opportunities for economically disadvantaged people in the U.S. and overseas who are underserved by traditional financial institutions. It puts communities with the greatest needs first. Community investing maximizes the social impact investors can have with their investments by making it possible for local organizations to provide financial services to low-income individuals, and to supply capital for small businesses and vital community services, such as child care and affordable housing.

Want to learn more? Go here.

The "Green" Car

The world's major automakers are tempering their enthusiasm for hydrogen-powered fuel cells to solve the environmental and geopolitical problems caused by dependence on gasoline.

Instead, as a three-day "green car" conference sponsored by French tire maker Michelin Group wrapped up in LA last week, representatives of the major automakers said redesigned diesel engines, hybrid gas-electric cars and several alternative fuels would be the short-term answer to reducing emissions and cutting gasoline use.

"No one has a silver bullet that will cure everything," said David Hermance, executive engineer for environmental engineering at the Toyota Motor Co. research and development unit in Torrance.

Automakers have been trying numerous possibilities: Cleaner-burning gasoline engines; hybrids, which Toyota and Honda Motor Co. already have on the market; various diesels designed by European automakers; and battery-powered vehicles.

Read more here.

World's Most Sustainable Companies

Eight new companies will join the Dow Jones Sustainability World Index, reflecting their remarkable integration of economic, environmental and social criteria into company strategies and core business operations. The index will again include 300 companies from 22 countries.

The joining members are Anglo American of the UK, DSM of The Netherlands, Fortum of Finland, Holcim of Switzerland, Hewlett-Packard and Praxair of the USA, Toyota Motor of Japan and Veolia Environnement of France.

What is the DJSW Index? Launched in 1999, the Dow Jones Sustainability Indexes are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide. Download the list of current members here.

Download a copy of the index review report for 2003 here. Interesting reading.

If you're targeting environmentally conscious companies for attraction to your area, this is a list that you will want to study carefully.

Learn more about the sustainability index here.

Retail Developer Profile: Mills Corporation

Looking to interest major retail developers in investing in your area? Be sure to talk with the Mills Corporation. Here is a short profile of the company.

The Mills Corporation is a self-managed real estate investment trust (REIT) based in Arlington, Va., that owns, develops, leases, acquires, redevelops, expands and manages retail and entertainment destinations. The company employs approximately 1,800 people in the U.S., Canada and Spain.

Over the past 18 years, Mills' portfolio has inspired a new standard in retail and entertainment. Through the "Mills touch" - the company’s proven ability to anticipate trends, engage consumers, and create exceptional retail and entertainment experiences - Mills’ properties consistently capture the imaginations of consumers and partners from around the world.

Today, Mills oversees a portfolio of 25 retail and entertainment destinations that drives more than $4.2 billion in annual sales.

Scope of Operations:

- Mills currently owns and manages 25 retail and entertainment destinations in the United States and Europe.
- Aggregate Gross Leasable Area (GLA): 32 million square feet
- Annual Shopper Visits: 220 million (2002)

Highlights:

- Portfolio Occupancy: 94 percent (2002)
- Average Specialty Store Sales: $331 per square foot (Year-End 2002)
- Total Tenant Sales: $4.2 billion (2002)

What new projects does Mills have underway?

- St. Louis Mills in St. Louis, MO will be a 1.2-million-square-foot Landmark Mills property featuring a one-of-a-kind Sports Village and a PBS-themed children’s learning environment. (Opening November 13, 2003)

- A Landmark Mills center, Cincinnati Mills in Cincinnati, OH will be a 1.5-million-square-foot retail and entertainment destination. Cincinnati Mills is Mills’ first acquisition converted into a Landmark Mills. (Opening Spring 2004)

- A Landmark Mills center, Vaughan Mills in Toronto, Canada will be a 1.2-million-square-foot retail and entertainment destination. (Opening Fall 2004)

- Pittsburgh Mills in Pittsburgh, PA will be a 1.1-million-square-foot Landmark Mills property. (Opening Spring 2005)

- Meadowlands Xanadu, a 4.76-million-square-foot 21st Century mixed-use complex in Bergen County, NJ, will feature an unprecedented array of family entertainment, sports, retail, hotel and office space. (Opening 2005)

- A 21st Century mixed-use venue, The Piers 27-31 in San Francisco, CA will provide public access to the San Francisco Bay and include recreational activities, restaurants and office space. (Opening Fall 2005)
108. N. State Street in downtown Chicago will be a 21st Century Retail and Entertainment center.

Other retail developer profiles at ED Futures: The Rouse Company here.

Grocer Responds to Wal-Mart Threat in Greater Cleveland

Here is another example of the competitive impact that Wal-Mart is having on established retailers in the marketplace. Check out our earlier analysis of the grocery industry nationwide here.

Giant Eagle announced it is lowering prices at all its Cleveland area stores. The move could be prompted by new competition from Wal-Mart, which has become the nation's largest grocer and is expected to capture more than a third of the entire grocery market in five years. Area grocers note that the area's population is not growing, but the number of food retailers is on the rise, meaning someone is going to take a hit. And if the recent past is an indication, it's not going to be Wal-Mart.

Source

Arizona Has a Ways to Go for Science-Tech Driven Growth

A new report by Arizona State University's Morrison Institute stated that "Arizona is not in the Top 10 by any ranking, and does no better than the national average on most indicators." The report also found that Arizona is trailing several neighboring states that traditionally have shown stronger commitments to science and technology.

The Morrison report also referred to the Milken Institute's national study of the economic importance of the science and technology industries in each state. While Colorado ranked second, California third, Washington state sixth and Utah ninth, Arizona ranked only 18th.

What would smart, sustained investment in a high tech future look like in Arizona? The examples of 4 competitor states (California, Colorado, Utah, and Washington) suggest that Arizona needs:

- Lasting, enthusiastic leadership that recognizes the economic value of science and technology

- The right message and strategy to convey the urgency of this matter

- Investment in the creation and sustenance of first-tier research institutions

- More and better mechanisms to improve the transfer of ideas into the marketplace

- A belief that the state can be a leader in science and technology

Download the report here.

More IT Jobs Head to India and China

Computer Associates International plans to hire several hundred workers in India and China in the next year, its top executive has said. Computer Associates had about 16,000 employees at the end of March, with approximately 6,900 overseas. It dismissed about 450 employees in April as part of a reorganisation of its services business.

The Islandia, New York-based company plans to add "a few hundred people" at a software development center in Hyderabad and about 100 more jobs in China, Computer Associates Chief Executive Sanjay Kumar wrote in an internal memo. Kumar said Computer Associates' international expansion wouldn't come at the expense of its US research staff or result in layoffs elsewhere in the company.

The business software maker is the latest large US technology company to expand overseas to take advantage of lower labour costs.

Source

Memphis Area Officials Debate Local Minimum Wage

Two camps are forming over the debate about creating a wage floor for companies seeking tax breaks from the Memphis and Shelby County Industrial Board.

Some business officials worry that forcing companies to pay a minimum wage will drive business to other cities, while others suggest it could be a tool to attract higher paying jobs. Some local government officials believe the wage floor will help ensure more higher paying jobs for the area.

This is a contentious issue being debated in many communities across the country. Over 125 cities have adopted living wage laws that set a local minimum wage for projects receiving local economic development incentives. Most economic developers we've talked with do not see the wisdom of this policy, especially at a time when the economy is working hard to get back on its feet.

Go here to read more.

No Daimler Deal for Georgia

Germany-based DaimlerChrysler AG, the world's largest maker of commercial vehicles, has confirmed that it will not build a van plant near Savannah, Georgia, that the state had hoped would bring thousands of jobs and provide a big boost for its economy.

Source: SiteNet.

Household Income Trends

Recent trends in household income growth vary significantly across states.

At the national level, the newly released Census data on median household income for 2002 contained few surprises. Income losses over the past two years were shown to be somewhat mild relative both to job losses as well as to the income losses experienced during recent downturns.

Several mitigating factors have shielded household incomes in recent years. Workers who have not lost their jobs have clearly benefited from tax cuts as well as from rapid gains in productivity and the value of non-wage forms compensation such as health insurance.

While income losses have been somewhat mild for the nation as a whole, several states have seen significant declines over the past two years. Looking at median household incomes in the 2000-01 period relative to the 2001-02 period, the Census found that ten states and the District of Columbia have experienced significant income losses.

Household incomes in the Midwest region were hardest hit, with four states (Illinois, Michigan, Missouri and Ohio) experiencing declines. Of the remaining states that lost income, three were in the South (Florida, Mississippi and North Carolina), and three were in the West (Hawaii, Nevada and Oregon). Only one state, Oklahoma, with its large oil and defense industries, gained income over the sample period.

It is somewhat surprising that no state in the Northeast registered significant losses in money income over this period, since only the Midwest region experienced weaker employment growth. For Northeastern states, broader measures of household income have certainly fared worse than money income, given that households in the region tend to have relatively large asset holdings, and therefore have seen large declines in non-wage forms of income such as capital gains.

In contrast to the experience of the Northeast, in a few states, weak recent income gains appear at odds with relatively strong local labor markets. In particular, strong employment conditions in Hawaii, Florida and Nevada were unable to ward off income losses. It is possible that the dominant tourism industry in these states did not experience the rapid productivity gains seen elsewhere in the economy.

Abstracting away from migration trends, differences in productivity gains across states are likely at the root of many of the regional differences in recent household income growth. As such, the states that have seen the healthiest recent income trends may well be among those that are first to experience renewed job growth going forward.

Source: Economy.com

Job Market Expected to Look Up, New HR Reports Says

According to new survery by the Society of Human Resource Managers, 67% of HR professionals and 44% of employees believe the job market will remain about the same over the next 6 months. Meanwhile, 38% of employees believe it will improve generally over the next 6 months, compared to only 25% of HR professionals who hold this view.

Both groups see improvement in the job market over the next 12 months, with 65% of HR professionals saying it will generally improve, compared to 56% of employees who share this assessment.

No great surprises in the survey results, but they are useful in calibrating expectations about the future labor market and economic environment.

Go here to download the survey report.

Dean Kamen: A Dealer in Hope

Dean Kamen, world-renowned inventor, was the keynote speaker at Cleveland-based CAMP Inc's “2020 Vision” program yesterday. I was there and thoroughly enjoyed his message on innovation, his low-key demeanor and his entry into the room on one of his Segway Human Transporter.

Kamen shared his philosophy on innovation and its importance to technology and manufacturing companies, highlighting his personal experiences with product innovation and his thoughts on the role of innovation in remaining competitive.

Kamen, known for inventing such innovative products as a the iBot Mobility System and a two-wheeled, gyroscope-based electronic device called the Segway Human Transporter, is a tireless advocate for science and technology. As an inventor, he holds more than 150 U.S. and foreign patents, many of them for innovative medical devices that have expanded the frontiers of health care worldwide. In 1982, Kamen founded DEKA Research & Development Corporation, which develops internally generated inventions as well as provides research and development for major corporate clients.

In addition, Kamen is the founder of FIRST (For Inspiration and Recognition of Science and Technology), a program to encourage young scientists and inventors. See FIRST.

Here is the essence of his comments:

1. Great technology alone does not bring about innovation.

2. Innovation is not a straight line with a predictable path.

3. Don't let the bumps in the road stop you. Quoting Churchill: "If you're going through hell, keep going."

4. Quoting Einstein: "If we knew what we were doing, it would not be called research."

5. Risk, failure and unpredictability are unavoidable in innovation.

6. His advice on how long things take: "make sure you fall behind early in your schedule--the sooner you fall behind, the more time you'll have to catch up.

7. Solving solutions is not innovation. (Kamen finds that most of his clients want him to fix problems with their products, which are solutions to some problem. To stop there is not innovation.)

8. It's not what we don't know that inhibits innovation, rather it's what we do know that just ain't so.

9. Innovation is not a spectator sport. Leadership must be engaged fully.

10. Management is about doing things right, and leadership is about doing the right things.

11. Great quote: "To err is human...unfortunately it is not our company policy."

12. Usually the punishment for failure is much larger than the reward for success.

13. An innovator asks this question: "Is this the best way to solve the problem facing my client or customer?"

Consumer Industries Doing Better

The latest word from Economy.com on consumer service and retail industries is that things are looking up.

Consumer industries as a whole have performed better than other industry groups since the recession and several industries that languished during the past two years seem to be getting their bearings. As a group, revenue growth is expected to reach 6.4% this year, slightly below the 6.9% growth reached in 2002, though still the best performing group of industries.

Perhaps more importantly for the economy going forward, profits are sturdier this year. This is vitally important. While much of the improvement is attributed to cost cutting, particularly for retailers, hotels and gaming, and the manufactured housing industry, improved pricing power also plays an important part for such industries as restaurants and medical equipment. The biotechnology, internet and cable industries, which have enjoyed double digit revenue growth for years but no profits, are finally turning a profit.

Profit margins for consumer industries exceeded 5%, the best performance in four years. Stronger profitability will allow for further expansion and improve the prospects for a return to hiring during the balance of this year. Revenue growth is expected to exceed 7% in 2004 as global economies gain further momentum.

What about health care, which is a large employer in most regions? While still strong, growth is moderating in the health-related industries though profit margins continue to improve. For-profit hospitals are reporting across-the-board gains, thanks to successful consolidations and cost-cutting plans implemented over the past few years. The health insurance industry remains in top form. Three years of accelerating double-digit premium hikes and aggressive reorganization and cost cutting have enabled most insurers to boost profits and stock prices significantly. Not-for-profit hospitals remain on shakier ground with narrow profit margins, but performance has improved over the past year and is trending upward. Higher private and government reimbursements are supporting these improvements. Utilization and prices are still growing at a steady clip and an estimated $25 billion of hospital projects are currently under construction. The greatest downside risk to healthcare providers is burgeoning state deficits, which will certainly lead states to cut back on the Medicaid services they offer.

As growth moderates for heretofore stellar industries, other consumer industries, including restaurants and recreational goods and services, are enjoying above-average revenue growth through mid-year as a result of cyclical improvement, which will accelerate through next year. This explains why so many new restaurants are coming on stream in many metro areas. People still want to go our and eat. Stronger pricing power is a key ingredient to better industry performance for such industries as restaurants. Prices of food purchased away from home, a good proxy for menu prices, are up 4.5% over the past two years, comfortably ahead of the rise in wholesale prices for food during that period. Revenue growth is twice as high mid-2003 as a year ago.

Growth in sales at discount merchandisers, as well as specialty retailers, has also accelerated in recent months thanks to strong household cash flow due to tax cuts, rebate checks and cash-out refinancing. As we reported earlier this week, Wal-Mart is eating many grocers' lunch.

Economy.com estimates that households extracted more cash from their real estate in the first half of this year, more than they did all of last year. Not all consumer industries are enjoying strong or strengthening conditions. A turnaround in revenues for the hotels and gaming, entertainment, printing and publishing and newspaper industries will mirror macro trends.

Despite the recent gains for consumer spending and growing evidence of a firm rebound in the macro economy, consumer industries that depend on discretionary consumer spending still face near-term risks. Weak labor market conditions threaten household incomes and confidence. Wage growth is also slowing, as employers limit pay raises and consumers remain heavily indebted. Moreover, there is little pent-up demand for consumer goods. The disposable income curve is one to watch in your area to gauge where consumer services and retail will head in the next 6-12 months.

Certain consumer industries face structural obstacles. Both traditional department stores and certain specialty retailers, such as furniture stores, are constrained by competition from discount department stores. As a result, pricing power is weak and profitability is well below the industry average. Indeed, deflation remains the norm for specialty retailers.

Go here to read more, if you subscribe to Economy.com.

Automotive Continues Offshore Investment

This is not good news for American communities with major automotive operations now, or those with their heart set on luring the next big auto plant to town.

According to A.T. Kearney Management Consulting, nine out of 10 executives surveyed at North American automotive manufacturers and suppliers say they intend to move certain non-manufacturing business processes to low-cost offshore locations.

Drivers for the growing momentum in this migration of labor include fierce competition in domestic and foreign markets; continuing cost reduction pressures; and an industry-wide strategy calling for local presence by automakers seeking growth in emerging markets, such as Asia and South America, and by suppliers in support of their customers.

A.T. Kearney estimates the North American automotive industry, including manufacturers and suppliers, spends approximately $9 billion annually on business processes with the potential to be offshored, representing an enormous opportunity for cost reduction and profitability improvement.

“Done right, offshoring for select engineering, information technology and other support functions to India, for instance, can reduce automakers’ and suppliers’ costs by nearly 50 percent compared with doing the same functions in the U.S.,” said Richard Spitzer, vice president in A.T. Kearney’s Global Automotive Practice and co-author of the study.

“In addition, our research indicates quality is as good or better when transitioned to these particular regions,” Spitzer added. “These cost-quality dynamic is making offshore initiatives extremely attractive for auto suppliers and manufacturers.”

Engineering and IT are the predominant functions being sourced to offshore labor pools, Spitzer said. Additionally, certain financial and accounting services and call center activities also are well-suited for offshoring.

Shifting manufacturing to markets with lower wage and benefits requirements has been fairly widespread in the auto industry for several decades. Moving business processes to offshore locations, however, is a much more recent development across industries. Automotive is not the leader at this point, Spitzer said, but interest is clearly quite high.

The most popular destinations for the migration of business processing activities, according to automotive executives responding to the survey, are:

- India (24 percent)

- China (15 percent)

- Mexico (13 percent)

- Brazil (10 percent)

- Czech Republic (8 percent)

“India is clearly the destination of choice for business processing services across all industries,” said Nagi Palle, co-author of the research and a principal at A.T. Kearney. “There are tens of thousands of well-educated, English-speaking and highly motivated engineering, IT and accounting professionals in India with the skills and capabilities auto manufacturers and suppliers need for offshore business processing.”

There are three primary business models for firms conducting business offshore, according to A.T. Kearney. They are:

- Completely outsourced business processing, through local or U.S. based third party providers

-Captive divisions or subsidiaries operating offshore, but fully owned by North American auto or supplier companies

- Hybrid approaches that combine elements of the outsourced and captive models.

For now, there is no single predominant model for transferring business services to offshore environments, Palle said. “We find successful examples of all models and there is no ‘right’ model yet. In fact, the flexibility available to companies looking to move services offshore keeps the situation competitive and creative, which are desirable characteristics for executive decision-makers.”

While nearly all companies surveyed indicated some level of participation in offshoring, the relative size of offshore operations for automotive manufacturers and suppliers is still small compared to other industries, such as high tech manufacturing and services, Palle added. “We are still early in this process,” he said.

Source: A.T. Kearney Automotive Group

Do Not Call Legislation Should Stand

As you know, we have been engaged on the "do not call list" debate. You may find this bit of economic reasoning to be helpful as you think through your position of this important issue. This material is taken from the most recent issue of Economy.com's report.

Congress obviously does not care for a recent federal judge’s ruling against the FTC’s "do not call" list. Economy.com’s Mike Burt wrote an article way back in 2002 that outlines the economic justification for the “do not call” list. The case today is the same as it was back then.

"Fundamentally speaking, government regulation of an industry should only be necessary if a market failure exists. A market failure occurs when a market system fails to produce the optimal solution. One common form of market failure involves externalities, where the full costs of a transaction are not borne by the market's participants. This is the case with telemarketing, in that the search costs that a solicitor incurs in its efforts to acquire customers are partially shared with consumers who are not interested in undertaking a transaction with the telemarketer.

Due to the myriad number of market participants, the transaction costs of each individual consumer trying to negotiate the terms under which each telemarketing company may contact them would be prohibitive. Thus, consumers are not able to effectively charge marketers for the time they lose in responding to an unwanted call. This lost time is an externality of the phone soliciting market, in that the sellers of the products and services sold by telephone are not required to compensate people for the time cost incurred on the part of those being solicited. This is on par, for instance, with a factory generating pollution that affects far more people than those who make or consume its output.

Under the current circumstances, there is a role for the government to step in to try to transfer at least some of the costs of these externalities to the telemarketers."

What does Don Iannone think? I am inclined to agree with Burt's assessment that the "do not call" list should stand. As I said in an earlier article, economic developers need to be more proactive about this issue because of the potential impact on call center jobs across the country, and yes even internationally.

Go here to read more, if you subscribe to Economy.com.

Canadian Venture Deal of the Year

Venture capital plays a crucial role in helping a wide array of companies worldwide to grow and develop. In our look at the venture investing community, we discovered that the Canadian Venture Capital Association selects a "deal of the year' each year.

The Canadian Venture Capital Association (CVCA) has just announced that Brightspark Ventures is the recipient of the CVCA’s 5th Annual ‘Deal of the Year Award’.

Established in 1998, the purpose of CVCA’s ‘Deal of the Year Award’ competition is to promote, highlight and celebrate the achievements of venture backed Canadian companies. The selection process focuses on firms with the most significant return during the last twelve months ending June 30, 2003.

Brightspark Ventures won this years’ award for its investment in Think Dynamics. The investment in 2001 generated a return of 163% when IBM acquired Think Dynamics in May 2003. This represented an investment multiple of 8.2.

Think Dynamics accelerates a critical element of IBM's strategy to help customers respond more quickly to changing business needs - such as peaks in demand and potential system failures - by dynamically allocating the right computing resources at the right time to the processes, minimizing human error in the process.

Founded in 1999, Brightspark Ventures works with entrepreneurs to develop and build market-leading software companies. Brightspark’s innovative approach combines access to capital with an in-house team of experienced professionals in order to help early stage companies through their development and growth phase. Brightspark’s involvement with start-ups ranges from working with domain experts looking to commercialize an idea or technology, to working with experienced entrepreneurs looking to scale their existing business.

Canadian Venture Capital Association (CVCA) The CVCA was founded in 1974 and is the trade association that represents Canada’s venture capital and private equity industry. It is a member-based organization consisting of venture capital firms and organizations who manage pools of risk capital designated to be invested in small and medium-sized growth businesses in Canada. The CVCA fosters professional development, networking, communication, research and education within and outside the venture capital industry and represents the industry in tax and regulatory matters.

Source

Nex Mexico's Tamarind Institute

Tamarind Institute, based at the University of New Mexico, is a center for fine art lithography that trains master printers, engages in teaching and research, and houses a professional collaborative studio for artists. Tamarind is recognized internationally for its contributions to the growth of contemporary printmaking around the world.

What is a lithograph? Basically, it is a print made by using a press to transfer an image that was created initially on stone or metal plate to paper. Aloys Senefelder, who invented lithography in 1798, preferred to call it "chemical printing", since the process depends on the chemical interaction of grease, nitric acid, gum arabic, and water, rather than the stone from which the name lithography is derived. Although the term can refer to commercially reproduced images, such as those on posters or in magazines, at Tamarind a lithograph is an image made by an artist who works closely with an artisan printer.

Industry cluster and science and technolohy experts talk a lot today about "core competencies" that exist in thr world of academe that can be built upon commercially. The Tamarind Institute is a perfect illustration of that.

Go here to learn more.

New Mexico Artisan Cluster

Here is a short profile of business concentrations in New Mexico's artisan manufacturing cluster.

- Total companies: 400
- Jewelry companies, large: 50
- Jewelry manufacturing employees: 6,890
- Furniture companies, large producers: 40
- Furniture manufacturing employees: 3,850
- Pottery and glass manufacturing employees: 5,170
- Clothing manufacturing employees: 5,380

Source: TVI Perkins Project

Creative Communities

I have been helping the New Mexico folks with some ideas on how to build upon their creative advantage. The center stage star is Richard Florida for this effort, but I'm throwing in my two-cents worth as a SME (subject matter expert). My job is to think about how to convert some of the more abstract ideas into practical actions.

First, it makes enormous sense for New Mexico communities to build upon their creative advantage. It comes from many different directions, but the one that I think is most powerful is its "design" expertise in jewelry, clothing, home furnishings and other products taking on a Southwestern look. It's very powerful and distinctive. And it's very old, being grounded in ancient Native American and Hispanic culture. There lies the power.

Click here to read a good earlier article that talks about some of this thinking in New Mexico.

Richard Florida is not the only expert in the world on creative communities and economies. You may find some of John Howkins' ideas to be of interest. Learn about his book, The Creative Economy here. Howkins identifies these priorities in building stronger creative economies:

1. Knowing What It Is. Psychologists, researchers and others are exploring links between the brain (as measured by brainwave activity), mind, consciousness and creativity.

2. Using It. Individuals need to know how to recognise, manage and develop their own creative skills. Having good creative skills in the 21st century - and knowing the law and economics - is as important as having good typing or computer skills was in the 20th century.

3. Turning Creativity into Money. The relationship between creativity and creative business products. What is the difference? At what point does a new idea become a product?

4. Economics. Economists are defining a 'new economics' based on information and ideas. They are exploring concepts of 'creative capital'.

5. Business Management. Managers need to know how to manage creativity within an organisation, both commercial and non-profit. How to encourage and reward people's creativity.

6. Law. Intellectual property laws cover patents, copyrights, trademarks and designs. (1) Public Policy. Patenting is in crisis as people claim patents for genetic matter, computer programs and 'business methods'. Copyright can't cope with digital copying. The laws need updating, urgently. (2) Individuals. People need to know how to protect their own ideas.

7. The Internet and Digital Media. Digital media are changing how creativity can be expressed, and how creative products are copied, priced and sold.

8. Public Policy and Governance. Complex issues require creative solutions. Governments and public bodies need to harness creativity to generate new approaches to public policy issues such as the environment, energy, transport healthcare and education.

9. Education and Training. Schools, colleges and educators need to teach creativity both generically and in terms of specific skills (management, law). They must bring creativity into the heart of the learning process, not only into the arts and media.

Regional Compact for Sustainable Economic Development

The Bay Area Council has been working for sometime to develop a compact among San Francisco Bay area communities to encourage sustainable economic development. Download the draft report here. Lots of good ideas in it.

Some of the ideas in the compact need to be adapted to smaller metro areas and regions. Getting communities in a region to agree to move the same overall direction is the starting point. Getting them to actually do it is another.

One thing that I've learned in working with communities is that the top-down (region to community) approach to regional collaboration does not work unless there is a major crisis to drive it. In most cases, a bottom-up approach (community to the region) approach is more practical and more likely to get support. Think ground swell when you think regional collaboration. Build a region of vital communities! That is a sensible approach to regionalism for economic development.

Heads-Up on California Economy

Hopefully California can push past its current political carnival and get back to doing what it takes to improve the state's overall economic and fiscal health. Here is what the latest UCLA Anderson Business School Economic Outlook has to say about California.

The continuing loss of jobs across the United States and California, particularly in the Bay Area, is unexpected. I would add this is unexpected for everybody everywhere. This bad news has been offset to some extent by more positive reports regarding profit, productivity and business investment. Moderate-at-best growth is forecasted for the national and state economies by the UCLA Anderson Forecast, in their most recent quarterly economic forecast.

In his most recent forecast report, UCLA Anderson Forecast Senior Economist Tom Lieser said, “The main difference between this California forecast and the previous one … is the incorporation of a weaker pattern for growth shown by recent data for the year 2003 to date. The employment reports for May through August in California showed a pattern of continued job loss, not unlike the decline seen for the rest of the nation.” Lieser’s analysis predicts that nonfarm payroll employment numbers will show a – 0.3% growth rate for California in 2003. This downward trend will impact 2004, which will yield a meager 1.0% growth rate, improving to 2.2% for 2005.

Personal income and taxable sales are expected to show a similar pattern of moderate economic growth. 2003 will yield a weak 3.2%, 2004 an improving 3.9% increase and 2005 a solid 5.1% boost for personal income. The taxable sales forecast looks much the same: a 1.7% gain in ’03, followed by gains of 4.1% in ’04 and 5.0% in ’05.

“The forecasts for personal income and taxable sales, particularly for 2004, do not appear to be strong enough to solve the state’s near-term budget problem through economic growth,” Lieser says. “Fiscal year 2004 growth projections are weaker than the economic assumptions underlying the fiscal year 2004 California budget,” which was approved in August.

Any gubernatorial candidates want to tackle these challenges?

Go here to read a little more. (You must be a paid subscriber to get the detailed information.)

Business Investment Outlook

This is an important one to pay attention to.

After more than two years of declines, business investment is finally turning. Growth remains tepid and narrowly concentrated, however, which leaves the budding rebound vulnerable. Nevertheless, there are reasons for optimism.

Improving corporate cash flow, friendlier capital markets, a developing replacement cycle, new tax incentives, and firmer confidence will all facilitate accelerating growth in businesses investment over the next several quarters. After contracting in nine of the last ten quarters, real business investment posted solid growth in the second quarter of this year. Driven primarily by a sharp rise in computer and software replacement spending, real business investment jumped 8% on an annualized basis in the second quarter, marking the strongest quarterly growth in three years and the first year-over-year increase in two years. Rising spending on structures by energy, education and healthcare firms also contributed to the rise.

Recent monthly data indicate that growth has persisted over the last couple of months. U.S. factory shipments of nondefense capital goods excluding aircraft, a proxy for business investment, climbed by 5% on a year ago basis in July and are up 19% (annualized) over the last three months. Imports of capital equipment are also on the rise as are orders, which points to a more robust increase in investment this quarter.

The main driver of recent gains in factory orders and business investment is spending on computer equipment. Behind the pickup in computer hardware investment is substantial replacement demand. The Bureau of Economic Analysis estimates that the economic life of this capital equipment is approximately two and a half years. Most of the massive investment done in and around Y2K is thus now economically obsolete.

As such, as much as 40% of the existing capital stock of computer equipment needs to be replaced each year to keep the stock from shrinking. Currently, about three-quarters of computer investment is going toward just replenishing old stock (see chart). During the boom years, only half of computer investment was driven by replacement demand.

So, things are looking a little brighter. Let's hope it continues to gain momentum.

Read more here.

Ford: Lorain, Ohio Versus Hazelwood, Missouri

Missouri's governor has detailed for reporters the aggressive push that resulted in Ford Motor Co. reversing its decision to close an assembly plant near St. Louis and instead reportedly shut down the Lorain, Ohio Assembly Plant.

The last-minute deal to keep the suburban Hazelwood, Missouti plant operating while shuttering the Lorain plant was included in the four-year labor pact reached last week between the company and the UAW, according to company and union sources. A source told the Associated Press that Ford had decided to close the Lorain plant because many of its 1,700 workers would have the option of an early retirement package or a transfer to the Ohio Assembly Plant in Avon Lake, which jointly produces Econoline vans with Lorain.

A source close to the negotiations in Detroit yesterday confirmed that the Lorain closing is written into the tentative agreement between Ford and the UAW, but the timing and other details of the closing were still not available yesterday. source close to the negotiations in Detroit yesterday confirmed that the Lorain closing is written into the tentative agreement between Ford and the UAW, but the timing and other details of the closing were still not available yesterday.

The UAW's ''Ford Council'' -- including the president and bargaining representatives of each of the union's locals -- has already met and endorsed the new contract, according to union officials, and rank-and-file Ford workers are expected to start voting on the contract this week.

Missouri Gov. Bob Holden said a delay at the end of contract talks between Ford and the UAW gave Missouri a chance to launch a last-ditch effort to convince Ford to save the Hazelwood plant and its 2,600 jobs.

Holden said the effort to save the plant involved federal lawmakers from Missouri, state economic officials, business leaders and civic representatives from the city of Hazelwood and nearby areas, and included tax breaks, job-training incentives and other enticements for Ford if it kept the plant open.

As Paul Harvey says...and now you know the rest of the story.

Read more here.

Retail Developer Profile: The Rouse Company

We have been working on more retail development projects in the past year. We've uncovered some useful insights about upcoming projects being developed by major retail facility developers.

This article identifies some of the major retail development projects that The Rouse Company has on the boards across the country.

Fashion Show,
Las Vegas, Nevada
This expansion project will create a shopping destination that will rank among the top 10 centers in the country for both total size and sales volume. With a total of eight department stores, including Neiman Marcus, Nordstrom, Saks Fifth Avenue and Bloomingdale's Home, this high-profile center will also include a comprehensive mix of home and lifestyle retailers for residents and luxury apparel and accessory goods for domestic and international visitors. Phase II East Expansion and Project Completion October, 2003

The Shops at La Cantera,
San Antonio, Texas
This 1.3 million-square foot open-air center, which will be landscaped to create a cool and enticing pedestrian environment, will be anchored by Neiman Marcus, Nordstrom, Dillard's and Foley's. Other components include luxury and better-priced cutting edge retail and entertainment space. Opens Spring 2005

Kendall Town Center,
Miami, Florida
This ambitious project is designed with an open-air main street atmosphere that will be the gathering place for the surrounding community. Anchored by Dillard's and three additional department stores, the total 1.1 million-square foot project will contain specialty retail and restaurant space. Opens Fall 2005

Summerlin Town Center,
Las Vegas, Nevada
Located in the heart of the planned community of Summerlin, this proposed project will be anchored by Robinsons-May, Dillard's and up to six additional department stores and will include exciting specialty retail and restaurant space. Opens Fall 2006

The Gardens in Summerlin,
Las Vegas, Nevada
This new 200,000-square foot village center will contain an anchor grocery store, retail and restaurant space, and a community garden. Opens Fall 2005.

Texas Announces New Marketing Effort

The State of Texas will launch a $5 million marketing campaign aimed at bringing more jobs to Texas and will open six regional economic development offices across the state. Gov. Rick Perry announced the new offices will be in San Antonio, Dallas, Houston, El Paso, West Texas and the Rio Grande Valley.

In terms of scale and level of effort, $5 million is not a lot of money for a marketing effort to cover a state as large and diverse as Texas. However, in the current fiscal environment, every little bit helps.

Read more here.

Retail Update: Grocery Stores Struggle

According to a recent analysis by Economy.com, the grocery industry, long a source of stability during previous downturns, is in a major tailspin. Since domestic payrolls began to contract in March 2001, food and beverage stores have laid off 170,500 workers, accounting for more than 1 in 17 jobs lost in the U.S. during that period. The bigger threat to the U.S. economy, however, may be the enormous amount of real estate inhabited by traditional grocery stores. As conventional supermarkets are shuttered, the loss of critical anchors could have a destabilizing effect on retail real estate markets. This is one for a large number of communities to consider at this time.

The grocery industry’s recent decline is unprecedented. In just over three years, food and beverage establishments have shed 7% of their workforce. By comparison, the biggest payroll contraction to this point had been the mere 2% drop in grocery store jobs during the 1990-1991 recession. For decades, the grocery industry was the largest retail employer, at one point employing over 3 million Americans. Due to heavy job losses lately, however, the industry ceded that title this year to general merchandise stores.

Therein lies the answer to the grocery industry’s troubles. Wal-Mart Supercenters, which are classified as general merchandise stores despite their vast aisles of food products, have decimated the conventional grocery market. Wal-Mart’s ascent has been nothing short of breathtaking. Since opening its first Supercenter in 1993, Wal-Mart has grown to become the largest supermarket operator in the U.S., according to sales estimates by TDLinx.

Wal-Mart’s chief advantage is its unbeatable prices. Even Kroger, the second largest supermarket chain, has prices that are 13% to 24% higher than Wal-Mart Superstores, according to a study by Deutsche Bank. Wal-Mart’s expansion in the grocery industry has had a profound impact on food prices. Prices at food and beverage stores are growing this year at the slowest pace in more than three decades. Faced with the utter loss of pricing power, grocery chains are forced to cut back on labor, their biggest cost, exacerbating the downturn in national payrolls.

We have been working on more retail projects in the past year. This is an issue in many of communities where we work. As they say, you can't have it both ways--that is, you can't have your grocery store in your local shopping center and also have a Wal-Mart Supercenter across the street. There is only so much disposable income to spend in any community.

Read more here if you subscribe to Economy.com.

Quark Biotech Takes Its Incentives to California

Quark Biotech announced last week plans to shutter its Cleveland operations and relocate back to California. In today's Cleveland Plain Dealer, an article describes that the company will take at least $1.2 million in state technology grant money and maybe $200,000 from a City of Cleveland development grant with it back to California.

While there are no guarantees that any company will stay in place after receiving public incentive dollars, there are measures, called clawbacks, re-calibrations and recissions, that can help local or state government recover a part or all of what it invests in a company. Quark may return the Cleveland money, but the state may just be out of luck on this one.

The lesson here is that economic development incentives must be 'performance-based.' These measures should be built into incentive agreements at the front-end to ensure that all parties understand what the deal is.

Read more here.

Is Cleveland's Convention Center Back on the Table?

The Cleveland Plain Dealer reported this morning that plans for a new Cleveland convention center, declared dead last month, may be getting new life.

Business leaders, miffed when talk of a new center collapsed, have hatched another plan to drum up hundreds of millions of dollars: raise Cuyahoga County's tax on hotel stays and ask voters to pass a new tax on restaurant meals. They hope to place the issue on the ballot as early as March 2004.

Details have not been released but are expected to emerge as business leaders continue their talks with City and County officials.

Stay tuned.

Read more here.

What Lies Ahead for Silicon Valley?

That question is on everyone's mind in the Bay area.

It could take an additional seven years for the Silicon Valley economy to recover the jobs it lost when the technology investment bubble collapsed, according to a report scheduled to be released today. But in the long run, that might be a good thing. Those predictions are part of a wide-ranging report on the valley's future commissioned by the Silicon Valley Manufacturing Group, whose member companies employ 1 in 5 valley workers. Economic growth in the valley will lag the rest of the nation through 2005 and employment won't return to its boom-era level until 2010, according the report, Silicon Valley 2004.

Not the answer that Silicon Valley economic developers wanted to hear.

Go here to read more.

Do-Not-Call Leaves Call Centers in a Lurch

The largest telemarketers are desperately searching for a Plan B, now that Plan A, that is stopping the federal government from establishing a national do-not-call registry, has failed to get results. The question is: "Is there really a plan B?"

As they gather for their annual convention this week, those who sell mortgage services, credit cards, dating services, educational services, and corrugated roofing over the phone say that if they do not change the way they do business immediately, they may follow door-to-door salesmen into commercial extinction.

The teleservices industry says some two million phone-solicitation jobs could be lost within months. But federal regulators are skeptical. For one thing, more than two dozen states have set up do-not-call lists without significant effects on jobs, regulators say. Federal labor statistics indicate about 450,000 people work in telemarketing, but the industry says that figure does not include most callers employed directly by larger companies like banks and insurers.

So what's your take on this situation? I'm sure if many people in your area rely on call center jobs, this is a Freddie Kruger story--in other words it's a real horror story. But for most American citizens, who are tired of having their evenings interrupted by unwelcome phone calls by a telemarketer trying to sell you another home loan refinancing, this is a tale of victory. It's unfortunate that so many jobs may suffer because call centers have abused the public trust, but that is the situation that we now face.

Call centers were the darling of economic development prospects in the 1990's. Yes, there were skeptics who denounced call center jobs as the equivalent of hamburger flipper jobs, but many communities welcomed these centers and the jobs they provided. And many communities and states have plowed big incentive dollars into these deals.

Surely this situation will add to the jobless recovery problem that we are currently struggling with. The question is how can the teleservices industry "re-tool" itself as a survivor over the next couple years. They need to do something other than fight the national do=not-call legislation.

Here is my suggestion. Economic developers need to assess this situation on a statewide and national basis to determine from their standpoint how large of a problem may pose. Let's be proactive on this issue, folks. Don't wait until you get the news that your local call center is folding its tent. As we all know, that is the worst time to find a solution. Alternative scenarios should be considered from the best case to the worst case. We should be devising a plan to help communities respond to this possible looming crisis.

Go here to read more. (Free registration with NY Times is required.)

Cool Product Designs

Do companies in your community need to develop new products? Industrial design can help. What trends are driving this business today and what are some cool products that exemplify why industrial design is important?

Go here to read more about leading design trends in industry.

Go here to learn more about the leading designs of the past decade.

What is Industrial Design?

Industrial design is the professional service of creating and developing concepts and specifications that optimize the function, value and appearance of products and systems for the mutual benefit of both user and manufacturer.

Industrial designers develop these concepts and specifications through collection, analysis and synthesis of data guided by the special requirements of the client or manufacturer. They are trained to prepare clear and concise recommendations through drawings, models and verbal descriptions.

The industrial designer's unique contribution places emphasis on those aspects of the product or system that relate most directly to human characteristics, needs and interests. This contribution requires specialized understanding of visual, tactile, safety and convenience criteria, with concern for the user. Education and experience in anticipating psychological, physiological and sociological factors that influence and are perceived by the user are essential industrial design resources.

Who are some companies specializing in industrial design? Here are four examples:

- Ecco Design.

- Bally Design.

- Fiori.

- Herbst LaZar Bell, Inc.

If your community has a serious interest in building its creative sector, shouldn't you be developing businesses like these? Which companies in your community specialize in industrial design?

Industrial Design from an Artistic Perspective

Using creativity and the arts to drive economic development is a popular topic across America today.

If this is a topic of interest, you may want to think about industrial design from an artistic perspective. Here are some places to look for ideas in this area:

- Cleveland Institute of Art, Industrial Design Program.

- Industrial Designers Society of America.

- Carnegie Mellon University.

- Georgia Tech University.

- Purdue University.

- Rochester Institute of Technology.

- Kendall College of Art and Design.

- Arizona State University.

Minorities and Venture Capital

This summer the Kauffman Foundation released an important report on minorities and venture capital. If you are working on these issues, this is one you will want to read.

"Access to capital is one of the biggest hurdles for any entrepreneur - and even more so for minority entrepreneurs," said Carl J. Schramm, president and chief executive officer of the Kauffman Foundation.

What did the report find?

- Minority enterprise venture capital investing is quite profitable. The average investment per firm was $562,000; the average gross yield per firm was $1,623,900, generating an average net return of $1,061,500.

- Minority-oriented venture capital funds did not concentrate in high tech. Unlike the broader industry, which invested heavily in high-tech ventures, a more diverse portfolio kept funds focused on MBEs from their colleagues' steep slump.

- Public pension funds are the leading source of VC funds for minority businesses. However, these funders favor older, more established funds; therefore commercial banks and insurance companies as well as minor funding sources (under $5 million) such as government funds, foundations and individuals, play a key role in financing MBEs.

Download the report here.

Kauffman Foundation: What's Going On?

The Sept. 4 resignations of three Kauffman Foundation board directors, an inquiry by the Missouri Attorney General and reduced commitments to some local programs have left many Kansas City nonprofits wondering what the $1.7 billion organization's role will be in the future.

Paul Carttar, the Kauffman Foundation's new COO, admitted that there is reason for confusion. "I can assure you we have a high level of appreciation for how poor our communication back to the community has been, not just about our thinking at any given point in time but the process that we were going though in the re-evaluation of our focus and priorities," Carttar said.

Carttar said the foundation's new management team is working to repair damaged relations in the community. Part of its message is that Kansas City will remain a key part of the foundation's focus.

Changes at the foundation have become a lightning rod for nonprofits frustrated by economic conditions and financing problems that are out of their control, said Don Wise, president of CommonWealth Consulting LLC in Leawood, which works with area nonprofits.

Visit the Kauffman Foundation website. Kauffman is a huge supporter of economic development initiatives, especially those relating to entrerpreneurship. Let's hope all this great work continues.

Read more here.

California: Is the Perception Worse Than the Reality?

According to one local economist, it is. "A lot of what we have been hearing is over-the-top rhetoric," said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. "It's not the end of days that some politicians are making it out to be."

Here is another take California's situation. "What we are going through is part of a national problem, but a few politicians are taking the opportunity to blame the governor and Legislature for everything," said Stephen Levy, director of the Center for Continuing Study of the California Economy.

For the people who live, work and pay taxes in California, I hope the state solves its political problems. This will do a world of good for the California economy.

Go here to read more.

Latest Word From China: Let Us In

Is China on your mind? You may find this recent article to be of interest. In a nutshell, it quotes Chinese authorities as saying that the U.S. and other developed nations should open their trade doors even wider so Chinese companies can sell more goods in their markets.

I think I am pretty open-minded about trade matters, but I feel like the Chinese are trying to "Shanghai" us on this one. Read it and see what you think.

Greenville Braves: On the Move?

Greenville South Carolina is facing a not-so-subtle challenge that's all too common in the world of minor league baseball's musical stadiums — there's no guarantee the Greenville Braves will stay here.

Steve DeSalvo, Braves general manager, told The Greenville News his team would entertain offers from other cities, as well as other developers in Greenville while negotiating for a new ballpark in the West End.

The Braves play in the 10-team Southern League, where five teams have switched cities since the class AA Braves moved to Greenville from Savannah, Ga., in 1984.

Could your community face a similar situation in the future? Consider the possibility from the day the team arrives in your town. Go here to read more.