Author: William Cook

Latest News

The Case for Growth Centers: How to Spread Tech Innovation Across America (Brookings and Information Technology and Innovation Foundation). The innovation sector has generated significant technology gains and wealth but has also helped spawn a growing gap between the nation’s dynamic “superstar” metropolitan areas and most everywhere else. Neither market forces nor bottom-up economic development efforts have closed this gap, nor are they likely to. Instead, these deeply seated dynamics appear ready to exacerbate the current divides. Which is why the nation requires a major push to counter these dynamics. Specifically, the nation needs a massive federal effort to transform a short list of metro areas into self-sustaining “growth centers” that will benefit entire regions. This should include a federal competition to award 10 metros some $10 billion each over 10 years in R&D, placemaking, infrastructure, and workforce development money—all part of an “innovation surge” to spur the development of more tech hubs.

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State Economic Performance

Gross Domestic Product by County (U.S. Bureau of Economic Analysis). Real gross domestic product (GDP) increased in 2,375 counties, decreased in 717, and was unchanged in 21 in 2018, according to data released by the U.S. Bureau of Economic Analysis (BEA). This is BEA’s first official release of GDP by county statistics for all counties in the United States. GDP is the value of goods and services produced within a county. Real values are inflation-adjusted statistics—that is, these exclude the effects of price changes. The size of a county’s economy as measured by GDP varies considerably across the United States. In 2018, the total level of real GDP ranged from $18.4 million in Issaquena County, MS, to $710.9 billion in Los Angeles County, CA.

 

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Topics and Trends

Industry Watch

Redefining the Power Industry (McKinsey Quarterly). The demands of a changing climate are starting to affect how many businesses operate, from attempting to tamp down their carbon emissions and ramp up energy efficiency, to adjusting to new risks caused by violent weather. Electric utility companies in the United States are no exception. Here are four quick takes on the changes in store for the power industry. The first two size up the rising peril to utility assets and show how one US state is aspiring to meet new, tough clean-power mandates. Then a look at the potential of residential batteries and how they might buttress the industry’s stressed-out grids. Networks of residential batteries could provide backup power and help utilities manage challenges to the grid. As shown on the map, home storage is becoming more attractive to consumers as well. Lastly, one expert warns that climate change may be shifting the economics of long-term infrastructure investment. Power suppliers and many other businesses will need to be much more resilient in this changing environment.

Trade/Tariffs

Tariffs, Trade Policy Rise on List of Concerns for Risk Officers (Wall Street Journal). A recent slowdown in global growth has prompted U.S. businesses over the past year to grow more cautious, with some retailers moving factory operations out of China as tariffs on clothing and other imports take effect. Those decisions reflect a growing perception among executives and board members that economic-policy decisions could hinder their companies’ growth opportunities in the year ahead, according to an annual ranking of business risks. Concerns about economic policy jumped nine spots to second place on the Top Business Risks for 2020. In addition to worries about trade and tariffs, executives—particularly in the financial services sector—said they worried a prolonged period of low interest rates could continue to put pressure on profits. Other top risks included cybersecurity concerns, regulatory changes and the ability to attract top talent.

US-China Achieve Phase I Trade Deal (ABC News). Under a limited trade agreement, the U.S. dropped its plan to impose new tariffs on $160 billion of Chinese imports set for mid-December — a tax that would have likely led to higher prices on many consumer goods. The U.S. also agreed to reduce its existing import taxes on about $112 billion in Chinese goods from 15% to 7.5%. In return, China agreed to buy $40 billion a year in U.S. farm products over two years, even though U.S. agricultural exports to China have never topped $26 billion a year. In addition, Beijing committed to ending a long-standing practice of pressuring companies to hand over their technology as a condition of gaining access to the Chinese market. China also agreed to lift certain barriers to its market for such products as beef, poultry, seafood, pet food and animal feed. In all, the U.S. expects a $200 billion boost in exports over two years as a result of the deal.

Opportunity Zones

New Interactive Opportunity Zones Activity Map Launched (Economic Innovation Group). EIG launched a new Opportunity Zones Activity Map, an interactive online portal highlighting many of the most innovative and impactful developments catalyzed in the early stages of this new policy. It is entirely sourced from local press and public announcements. The map depicts the core components of the emerging Opportunity Zones marketplace, including investments utilizing the incentive, new funds forming to deploy capital into zones, and public and civic sector initiatives driving impact in communities. This portal features four maps that highlight the core components of the emerging marketplace: 1) Map of All Activities tracked in Opportunity Zones; 2) Map of Investments into Opportunity Zones; 3) Map of Funds that have formed to steward investment capital in Opportunity Zones; and 4) Map of Initiatives at the state and local levels that adapt Opportunity Zones to local priorities. The map will be updated on a rolling basis.

 

Developments Spurred by Opportunity Zone Tax Breaks Rising in SC, Amid Controversy (Charleston Post and Courier). A long-planned technology center on the Charleston peninsula, a $37 million gated luxury apartment complex on the Charleston peninsula called The Merchant, downtown redevelopment in Rock Hill, office buildings in Charleston, and redevelopment projects on the former Charleston Naval Base in North Charleston are all tapping into Opportunity Zone tax breaks. Across the nation and in U.S. territories, 8,764 census tracts with above-average poverty have become Opportunity Zones. In South Carolina, 538 census tracts met the criteria, but only 135 could be chosen, because states could designate only 25 percent of qualifying areas. The fact that much of the Charleston peninsula qualified, from Calhoun Street north, is partly because so many college students with little taxable income live there. The big question, and the one behind a vigorous and ongoing debate, is whether the OZ tax breaks are prompting beneficial developments that wouldn’t have happened otherwise, or enriching investors in developments that would have happened anyway. For more information on Opportunity Zones, CDFA has extensive resources available, click here.

Senators Unveil Bill to Expand ‘Opportunity Zone’ Reporting Requirements (The Hill). A group of GOP senators in early December rolled out a new bill to expand reporting requirements about investments in “opportunity zones” as the program aimed at revitalizing economically distressed communities faces mounting scrutiny, particularly from Democrats. The initial standalone legislation on opportunity zones included reporting requirements, but those requirements were not included in the final tax law because of the budget rules that the Senate used to pass the law. Sen. Tim Scott (R-S.C.), a leader on the initial OZ legislation, introduced the new bill that would codify requirements for investors and funds to report information about investments made in opportunity zones and adds penalties for individuals and funds that fail to appropriately file required forms. It also would require the Treasury Department to make information about investments in opportunity zones public and to work with other agencies to issue reports about new businesses, household income and housing in opportunity zones compared to low-income areas that weren’t designated opportunity zones.

The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.

Inclusive Growth

Intelligent Design of Inclusive Growth Strategies (Harvard Business School). Improving corporate engagement with society, as advocated in the Business Roundtable’s 2019 statement, should not be viewed as a zero-sum proposition where attention to new stakeholders detracts from delivering shareholder value. Corporate programs for sustainable and ethical sourcing practices, however, have fallen far short of solving the underlying causes of extreme poverty, extensive use of child labor, and threats to the environment and human health. However, the role for a new actor, a catalyst, can help companies forge new relationships with external funders, local intermediary companies, NGOs, and community leaders. The catalyst aligns the multiple stakeholders from multiple sectors into enduring, mutually- beneficial relationships that produce more value than that currently produced when stakeholders connect only by transactional relationships. For example, Golden Triangle Development LINK, a regional development agency in northeast Mississippi, acted as the catalyst for public-private partnerships among the state, TVA (electrification), local universities, and a financing authority to attract companies that have built and now operate manufacturing plants and pay high wages to formerly-unemployed workers in the region.

Innovation

First U.S. Cross-Country Commercial Freight Run by a Self-Driving Truck (Auto Channel). Plus.ai, a leading provider of self-driving trucking technology, announced that it has completed the first coast-to-coast commercial freight run with an autonomous truck on behalf of Land O’Lakes, Inc. The autonomous truck completed the 2,800-mile hub-to-hub trip from Tulare, CA to Quakertown, PA in less than three days. The truck was equipped with Plus.ai’s advanced autonomous driving system which utilizes multimodal sensor fusion, deep learning visual algorithms, and simultaneous location and mapping (SLAM) technologies. The journey was an important milestone in validating the system’s ability to safely handle a wide range of weather and road conditions. The vehicle drove primarily in autonomous mode through the 2,800 miles across interstate 15 and interstate 70, passing through varied terrains and weather conditions. A safety driver was onboard to monitor and assume control if needed, and a safety engineer was present to monitor system operations.

Infrastructure

Funding Opportunity of $550 Million Announced for High-Speed Internet in Rural America (U.S. Department of Agriculture). More than half of a billion dollars in United States Department of Agriculture (USDA) Reconnect Pilot Program funding will be available in 2020 to develop high-speed broadband internet infrastructure in rural parts of the United States. The Broadband ReConnect program offers grants, loans and combinations thereof to improve rural e-connectivity. USDA will make available up to $200 million for grants, up to $200 million for 50/50 grant/loan combinations, and up to $200 million for low-interest loans. The application window for this round of funding will open Jan. 31, 2020. Applications for all funding products will be accepted in the same application window, which will close no later than March 16, 2020. To date, USDA has awarded $191 million through the ReConnect program with offers out to 47 additional potential recipients totaling more than $600 million in investments.

 

 

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Deal Makers

Incentives in Action

Roundtable Held on Evaluating Economic Development Tax Incentives (National Conference of State Legislatures and Pew Charitable Trusts). States and cities are now publishing more evaluations than ever and are using creative techniques to showcase evaluation results, including the use of podcasts in Kansas and YouTube videos in Washington. Recently, the National Conference of State Legislatures (NCSL), with support of The Pew Charitable Trusts, hosted the 5th Annual NCSL/Pew Incentive Evaluators Roundtable. The meeting is designed to discuss state activity around economic development evaluations. The roundtable process provides attendees the opportunity to share evaluation tips and strategies garnered from evaluators from across the country. To access the agenda and presentations, click here.

Utah Tax Rebates Bring Nearly 10,000 New High-Paying Jobs (Deseret News). A long-running state tax rebate program for businesses closed out 2019 with five new awardees announced that could lead to almost 3,000 new jobs in Utah. The final announcement for the year brings the 2019 totals for the Economic Development Tax Increment Financing (EDTIF) rebate program to 9,643 potential new jobs from 20 different companies that represent both in-state expansions and new, out-of-state investment. The tax increment financing program, which launched in 2005, offers a post-performance tax rebate of up to 30 percent of new state revenues that include Utah sales, corporate and withholding taxes paid out over a term that typically runs five to 10 years. The tax rebate is available to Utah companies expanding and other companies relocating or establishing additional operations in Utah. To qualify for rebates, companies must meet a set of criteria that includes minimum wages of 110% of county average wage in certain, targeted employment categories. Awardees this year included companies from the tech sector, manufacturing, aerospace, outdoor products and a new airline. The program is managed by the Utah Governor’s Office of Economic Development.

Five States to Work on Improving Business Regulations (National Governors Association). The National Governors Association (NGA), in partnership with The Pew Charitable Trusts, will work with five states – Colorado, Alaska, Delaware, Rhode Island and Tennessee – to help them improve their business regulatory processes to promote economic development. The five states will be part of a two-year policy academy tailored to the needs of each state, as defined by its governor, to look for ways state government can remove barriers for businesses to launch, grow and succeed. States and territories can potentially strengthen their economies by improving regulatory processes, and the five states will work to identify baseline data and action steps for pilot initiatives so that successes can ultimately be scaled up.

The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.

New Growth Opportunities

State Policy Innovations to Support Creative Placemaking (Federal Reserve Bank of San Francisco). “Creative placemaking” is the practice of integrating arts, culture, and design activities into efforts that strengthen communities. States are actively involved with these efforts, as 36 state arts agencies have grant programs dedicated to creative placemaking or community arts development. Another 15 states have established cultural district certification programs that use cultural resources to encourage synergies between economic and community development. However, critical gaps exist. To address these gaps, states should pursue the following public policy strategies: Elevate creative placemaking as a policy strategy in state plans; Establish mechanisms for connectivity among state agencies whose missions relate to placemaking or culture; Strengthen existing state policies that are positioned to foster creative placemaking and arts-based community development; Amplify and coordinate state funding streams; Educate federal funding gatekeepers about creative placemaking; Embed artists and designers into government agencies that influence creative placemaking or community development; and Equip more artists and cultural organizations to play significant community engagement and development roles.

Talent Development/Attraction

The New Geography of Skills (Strada Institute for the Future of Work). Skills define jobs. Jobs are made up of sets of tasks that require distinct skills in order to be successfully performed. The “skill shape” for any role like a software engineer is formed by the interactions between companies and industries in a specific region. When Amazon, IBM, or a small business is looking for a software engineer, they will not be looking for the same person with a similar skill shape because the skills depend on the specific work to be done. Supplemented with traditional labor market information, or LMI, these skill shapes offer unique insights into the job market as derived from the skills articulated by workers and employers themselves to better understand regional talent demands. Skill shapes provide a new lens into the job market by looking underneath occupations and industries to understand precisely the skills employers are looking for and how they compare to the supply of skills in the regional workforce.

The Scope of Modern Apprenticeship (Urban Institute). The “Fourth Industrial Revolution” will dramatically change future workplaces as new technology redefines necessary job skills. Apprenticeship programs should be a key part of training future workers. Beyond their success in the building trades, apprenticeships are now increasingly recognized as a cost-effective way to create new career pathways and increase economic mobility, all while addressing skill mismatches in the labor market. Effective apprenticeship programs: Build high-caliber talent pools, which is good for business, good for states (it drives business investment), good for those seeking to enter or move up in the workforce, and good for parents and other caretakers who come to understand that apprenticeship offers a viable entrance into a meaningful, gainful career. These programs can also change the economic welfare of whole communities, open occupations and related opportunities to people who otherwise would not have access, offer alternatives to student debt, and provide a highly marketable skill set (both technical and soft skills).

 

 

The SEDE Network Steering Committee includes: Stefan Pryor (RI), Chair; Val Hale (UT), Vice Chair; Julie Anderson (AK); Dennis Davin (PA); Jennifer Fletcher (SC); Kurt Foreman (DE); Joan Goldstein (VT); Manuel Laboy Rivera (PR); Jeff Mason (MI); Kevin McKinnon (MN); Don Pierson (LA); Mike Preston (AR); Sandra Watson (AZ).

For further questions on the content in this Bulletin or for information on the SEDE Network contact Marty Romitti, CREC Senior Vice President, at mromitti@crec.net

State Economic Development Bulletin November 2019_POSTED

 

Latest News * New State Data on U.S. Affiliates of Foreign Multinational Enterprises (U.S. Bureau of Economic Analysis). Majority-owned U.S. affiliates (MOUSAs) of foreign multinational enterprises (MNEs) employed 7.4 million workers in the United States in 2017, a 2.8 percent increase from the previous year, according to statistics released by the U.S. Bureau of Economic Analysis.

Latest News

* SEDE Network Meets in Providence RI *

Top economic development officials from nearly two dozen states met for SEDE’s bi-annual convening held September 8-9, 2019 in Providence, Rhode Island. The group was in Rhode Island for Sunday and Monday to discuss opportunity zones, trade and tariffs, urban and rural economic development, innovation, and other challenges and successes for state economic development organizations. The group also visited the Block Island windfarm and discussed “energy as economic development.”

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State Economic Performance

The Future of Workforce Development (Governing). Data was collected from 750 business leaders on how technology is transforming the future of work. The workforce as we know it is in the throes of a revolution. In this Fourth Industrial Revolution, technology is blurring the lines between the physical and digital worlds. As new technologies emerge, innovative companies have already begun to adapt, prompting re-evaluations of workforce development strategies. Among the many survey results, as the workforce of the future starts to evolve, hiring managers for businesses appreciate the importance of offering their employees opportunities to skill-up and retrain. However, despite a lack of major obstacles, few companies have taken steps to implement new workforce development programs. For instance, 68% of hiring managers see high value in formalized training programs for their employees, but only 46% prioritize them. This mismatch poses threats to workers’ livelihoods and companies’ talent pipelines alike.

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Topics and Trends

Industry Watch

Offshore Wind: America’s New Ocean Energy Resource (American Wind Energy Association). The U.S. has a vast offshore wind energy resource. American shores possess a power potential of more than 2,000 gigawatts (GW), nearly double the nation’s current electricity use. This potential presents an enormous opportunity to deliver large amounts of clean and reliable electricity to the country’s largest population centers, where it’s needed most. State policies in Maryland, Massachusetts, New Jersey, New York, Rhode Island, and others are vital drivers for the offshore wind industry. These policies will help achieve scale and develop an American supply chain. With stable policy in place, the Department of Energy found that the U.S. could install a total of 22,000 megawatts (MW) of offshore wind projects by 2030 and 86,000 MW by 2050, creating thousands of well-paying jobs in coastal communities. There are 74 different occupations needed during the various stages of planning, development and operation of offshore wind farms. Offshore wind development will also tap into the skills of workers in existing U.S. oil and gas companies, which have decades of experience developing ocean energy infrastructure.

Trade/Tariffs

China to Exempt U.S. Pork and Soybeans from Additional Trade War Duties (Politico). China has announced that it will exclude imports of U.S. soybeans, pork and other farm goods from additional trade war tariffs, opening the door for significant purchases of agricultural products. China’s National Development and Reform Commission and the Ministry of Commerce made the exemption in response to the U.S.’ decision to postpone an increase in the tariff rate on $250 billion of Chinese goods from October 1 to October 15. Previously, both pork and soybeans have been subject to heavy duties, imposed during successive rounds of Chinese tariffs on U.S. goods. China has levied three rounds of tariffs on U.S. frozen pork, including 25 percent in April 2018, 25 percent in June 2019 and another 10 percent in September 2019, bringing the final tariff to 72 percent. If all the trade war tariffs were removed, the rate would return to 12 percent, the “most favored nations” duty paid by China’s other trading partners. China has also imposed 30 percent tariffs on yellow soybeans — the sort the U.S. grows in abundance — including 25 percent in June and 5 percent on September 1, bringing the current tariff level to 33 percent. If the additional tariffs are removed, tariffs on U.S. soybeans would return to 3 percent — the same rate paid by importers of Brazilian soybeans, which have largely filled the gap left by the U.S.

Opportunity Zones

How a Tax Break to Help Poor Communities Became a Windfall for the Rich (New York Times). The stated goal of the Opportunity Zone tax benefit was to coax investors to pump cash into poor neighborhoods, leading to new housing, businesses and jobs. Instead, this NYT article presents evidence that billions of untaxed investment profits are beginning to pour into high-end apartment buildings and hotels, storage facilities that employ only a handful of workers, and student housing in bustling college towns, among other projects. Many of the projects that will enjoy special tax status were underway long before the opportunity-zone provision was enacted. Financial institutions are boasting about the tax savings that await those who invest in real estate in affluent neighborhoods. For example, SkyBridge Capital is using the opportunity zone initiative to help build a hotel in the city’s trendy Warehouse District, while the tax benefit also is helping finance the construction of a 46-story, glass-wrapped apartment tower in a Houston neighborhood already brimming with new projects aimed at the wealthy. Backers of the opportunity-zone program say luxury projects are the easiest to finance, which is why those have been happening first. Over the long run, they say, those deals will be eclipsed by ones that produce social benefits in low-income areas.

Rockefeller Foundation Pours Millions of Dollars to Keep Opportunity Zones on Track (Barron’s). The Rockefeller Foundation is injecting $3.7 million into programs to steer the Qualified Opportunity Zone program closer to its mission of boosting economically distressed areas. To help guide investors, the foundation will distribute the money to Washington, Oakland, Dallas, and St. Louis, giving each $920,000 in grants and services, including $400,000 to create a Chief Opportunity Zone Officer in their economic development authorities. The foundation’s funding is geared toward helping cities build out pipelines of potential projects and investments that will help guide investors looking for somewhere to put their money. That will ostensibly help funnel private capital toward projects that benefit existing communities. The Rockefeller Foundation seeks to promote the well-being of humanity throughout the world, advancing new frontiers of science, data, policy, and innovation to solve global challenges related to health, food, power, and economic mobility. For more information on Opportunity Zones, CDFA has extensive resources available, click here.

Time is Running Out on Opportunity Zones (Investment News). Time is running out to get the biggest tax break from opportunity zones, but there’s one snag for financial advisers: they don’t see a lot of compelling investment options for clients. To get the full tax benefit, wealthy clients (those with a net worth of at least $5 million, which can’t include a personal residence) must invest by the end of 2019. The sticking point is that the deferred tax comes due by Dec. 31, 2026 — which is seven years from the end of 2019. So, clients that invest in an opportunity fund in 2020 and beyond will not be able to get the maximum 15% tax reduction. That deadline could lead advisers and clients to rush into a poor investment deal. There are a lot more buyers than sellers, although some investors have passed on deals like building early childhood development centers. The deals would have had an estimated internal rate of return of roughly 4.8% to 5.2% at best and are risky because they were predicated on having a single tenant and payor. For the deal to make sense given the risk profile of the funds, projected returns would have to be around 8% to 10% for real estate and 12% to 16% for a private placement.

The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.

Inclusive Growth

The Real (surprisingly comforting) Reason Rural America is Doomed to Decline (Washington Post). According to the United States’ original 1950 urban classifications, rural America is crushing it. It’s home to about as many people as urban America, and it’s growing faster. So why do headlines and statistics paint rural areas as perpetually in decline? Because the contest between rural and urban America is rigged. Official definitions are regularly updated in such a way that rural counties are continually losing their most successful places to urbanization. When a rural county grows, it transmutes into an urban one. In a way, rural areas serve as urban America’s farm team: All their most promising prospects get called up to the big leagues, leaving the low-density margins populated by an ever-shrinking pool of those who couldn’t qualify. When we break the United States down by older county classifications, we see the entire population shift from rural to urban comes from fast-growing counties being redefined as metropolitan statistical areas.

Innovation

Reasons Why Innovation Needs Marketing (Forbes). Innovations only fail for a handful of reasons: lack of development, lack of support and lack of finding an audience. Failing because you neglected to understand your audience is a huge issue that needs to be resolved. Before an innovation is even created, marketing teams need to identify what needs are going unmet in the consumer population—what consumers don’t even realize they can’t live without. Think of Keurig machines. Voice-to-text apps. Subscription television. Marketing needs to think beyond what’s already here and imagine what’s missing. These are the places where innovation can make an impact. The currently saturated market? That’s where innovation goes to die. The following are a few ways innovation needs marketing to find a space for itself in the marketplace. Innovation needs marketing to: Create a Clear Market; Identify Opportunities; Identify Proper Channels; Create Ecosystems of Opportunity; Understand the Audience; and Find Useful Use Cases.

Infrastructure

Digital States Survey: Best Practices and Lessons Learned (Center for Digital Government). In recent years, states have made significant gains in addressing some of their most stubborn technological challenges. Experts from the Center for Digital Government analyzed 2018 Digital States Survey responses from all 50 states to uncover best practices and lessons learned. This guide unpacks five important technology trends across state governments and identifies five future challenges facing state IT leaders. States are maturing their cyber security strategies, improving user experience, reinventing their workforces, taking a smarter approach to cloud and transforming procurement. Future challenges for states include securing emerging technologies, coping with evolving privacy expectations, using tech to solve new public challenges, addressing broadband’s ‘last mile’, and managing long-term workforce disruption.

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Deal Makers

Incentives in Action

Maine Awards $1.5M in Challenge Grants to Two Emerging Forest Tech Companies (Mainebiz). One company makes insulation out of wood fiber. The other is developing a renewable heating oil substitute. Both companies will receive $750,000 grants from the Maine Technology Institute under the Emerging Technology Challenge for Maine’s Forest Resources competitive grant program launched in December to boost Maine’s rural forest-based economy. The two winning proposals were submitted by GO Lab Inc., a Belfast-based building products manufacturer, and Biofine Developments Northeast, which is pursuing commercial development of the first large scale bio-refinery deploying Biofine’s technology in Bucksport. The challenge grants are an offshoot of MTI’s collaboration on the Forest Opportunities Roadmap (FOR/Maine) Initiative, which is backed with funding from the federal Economic Development Administration and Department of Agriculture and is actively seeking out and supporting emerging technology companies in the forest resource sector.

States Should Look Beyond Economic Incentives When Attracting Businesses (Route Fifty). While economic incentives are a vital tool to attract businesses, governors and mayors should look at improving existing community resources first. Executive Director of the Utah Governor’s office of Economic Development and SEDE Network Vice Chair Val Hale suggests a few ways local governments can attract new business and create opportunities for residents. These include: Help Companies Reach Foreign Markets; Invest in Education, especially Computer Science; Provide Pathways for Workers; Promote Quality of Life; Focus on Sustainable Development; and Find the Secret Ingredient for Your Community.

Louisiana Launches Opportunity Zones Web Portal (Biz New Orleans). Louisiana Economic Development has launched an online service to connect investors with Louisiana properties eligible for the federal Opportunity Zone program. Through the new Louisiana Opportunity Zones web portal, investors can explore potential projects in Opportunity Zones throughout the state. The portal helps to identify and organize a pipeline of Louisiana projects in which local as well as national investors can invest and allows investor sponsors to download exclusive information about the projects. This statewide collaboration seeks to generate social and economic impact through long-term, private investment in Opportunity Zones. It creates a shared space to connect efforts across Louisiana for projects and deals to come to fruition. LED’s collaborative partner on the web portal is The Opportunity Exchange, a leading consultant on Opportunity Zone-related technology. A total of 150 census tracts in Louisiana are certified as Opportunity Zones.

The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.

New Growth Opportunities

Foreign-Owned Multinationals in U.S. Pay More than U.S.-Owned Counterparts (National Bureau of Economic Research). The total stock of Foreign Direct Investment (FDI) in the United States reached $4.34 trillion in value in 2018, a $319.1 billion increase from 2017 according to recent numbers from the Bureau of Economic Analysis (BEA). Communities often go to great lengths to lure foreign firms and a new NBER working paper suggests the effort is generally worthwhile. The study finds that foreign-owned multinational corporations operating in the U.S. pay 25% higher wages than comparable U.S.-owned firms in the same industry and location, much of that because they tend to hire more high-skilled workers. Adjusting for that, the study authors find that the same worker moving from a domestic to a foreign-owned firm earns 7% more. They also find substantial indirect efforts — knowledge spillovers, competitive pressure, and increased the efficiency of local suppliers – and find that increases in employment at foreign-owned firms significantly raises value added, employment, and wage bill at domestic firms in the same community. Considering these direct and indirect effects, every additional job created by a foreign-owned company in a community is worth $16,000 per incumbent worker.

* American Factory Documentary *American Factory Trailer (Netflix). The impact of FDI is highlighted in the Netflix documentary, ‘American Factory’, featuring the foreign direct investment by Fuyao in Dayton Ohio. Cultures collide. Hope survives. When a Chinese billionaire re-opens a factory and hires two thousand blue-collar Americans, early days of hope and optimism give way to setbacks as high-tech China clashes with working-class America.

Talent Development/Attraction

Rise of Automation: How Robots May Impact the U.S. Labor Market (Federal Reserve Bank of St. Louis). The use of robots has expanded globally. In the U.S., there were 1.79 robots per thousand workers in 2017, up from 0.49 robots per thousand workers in 1995. An analysis of data by the Federal Reserve Bank of St. Louis suggests employment in routine occupations has been constant or declining over the past few decades, and automation is believed to be one of the key reasons for this structural shift in the labor market. The analysis revealed a negative relationship between automation and routine manual employment in local labor markets, with the addition of one robot per 1,000 workers leading to a 0.12 percentage point decline in the ratio of routine manual jobs to population. While this study focused on routine manual occupations, automation could have an impact on a broader set of jobs. For example, with advances in artificial intelligence and computerization, several cognitive skills, such as handwriting recognition and pretrial research, are now automated to a certain extent. Thus, automation can have far-reaching consequences that may lead to structural shifts in the labor market.

State of the Workforce Report 2019 (National Association of State Workforce Agencies). Every state is set up differently in how they manage workforce programs. Yet each state works to accomplish the same thing in supporting their citizens with every opportunity to become self-sustaining. The National Association of State Workforce Agencies (NASWA), a national organization that supports the workforce agencies in every state, recently released its first-ever State of the Workforce Report. Profiles are provided for each state highlighting key labor market information and workforce agency programs. In addition, each state had the opportunity to feature “State Innovations” to demonstrate unique programs they are implementing to further support the state’s labor force.

* SEDE Members See Ocean of Opportunity *

SEDE Network members had the opportunity to tour the Block Island Wind Farm, the nation’s first offshore wind project, while gathering in Providence Rhode Island for the bi-annual convening. The Block Island Wind Farm (BIWF), developed by Deepwater Wind, is a 30 MW project with five 6-MW turbines off the coast of Block Island. Since the wind farm came online in 2016, electricity prices are down, tourism is up, and the island has high-speed internet for the first time. SEDE members talked with company officials and saw up close how America’s first offshore wind farm is an economic development success story.

Latest News

* SEDE Network Exclusive *
How State Economic Development Agencies are Helping Companies Develop Talent (CREC)
Businesses have been clamoring for talent for the past several decades. Though sustained low unemployment rates make the issue more apparent, the talent shortage that companies are reporting likely reflects structural demographic, organizational and technological changes as well as pressure from global competition to keep costs low while continuously improving products. This paper, developed for the State Economic Development Executives (SEDE) Network, describes promising practices for talent development and how economic development agencies can help companies access the talent they need. Four areas in which economic development professionals can make a critical difference include:

• Skill Upgrading
• Talent Retention and Recruitment
• Pipeline Development
• Cluster and Sector Strategies

Prepared by the Center for Regional Economic Competitiveness (CREC), this paper on Beyond Training: How State Economic Development Agencies are Helping Companies Develop Talent describes the types of activities to cultivate a talent pipeline that state economic development agencies may consider and identifies what some state economic development agencies are already doing.

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State Economic Performance

Governor’s Action Guide to Achieving Good Jobs for All Americans (National Governors Association). The Center for Best Practices (NGA Solutions) released a Governor’s Action Guide to Achieving Good Jobs for All Americans. A “Good Job” provides a family-sustaining wage for workers in a context that offers opportunity for continued career growth. The guide outlines opportunities for states to create responsive, nimble training and workforce systems to better prepare Americans for the jobs of the future. These opportunities fall into three focus areas: (1) the workforce of the future – aligning education and work; (2) second acts – helping midcareer workers achieve success; and (3) rural resurgence – empowering the rural workforce. The guide is a result of an NGA Chair’s Initiative that aimed to understand the changing world of work and the factors that affect an individual’s ability to connect to a good job and for businesses to access the talent they need to thrive in today’s global economy. Based on this research, this guide offers a toolbox of high-impact strategies that states can take to connect workers to good jobs today and in the future.

* New Opportunity *
State Policy Academy on Business Regulations (NGA Solutions and Pew). NGA Solutions, in partnership with The Pew Charitable Trusts, will support a cohort of states on strengthening their economies by improving business regulations through an NGA policy academy. Through this project, NGA Solutions, Pew, and external experts will provide technical assistance to selected states over a two-year period. The participating state teams will emerge from the policy academy with greater capacity to identify and pursue supportive regulatory or policy changes, including executive orders, pilot programs, or funding strategies. The strategies may also include pursuing legislative changes. All states and territories are eligible to submit proposals to participate. The Request for Proposals (RFP) from states interested in applying for the policy academy is now available and will be due by Friday, September 20. The project will run from October 1, 2019 through September 30, 2021. For more information, contact Sally Rood.

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Topics and Trends

Industry Watch

Aerospace as the Next Frontier to U.S. Manufacturing (Yahoo Finance). The aerospace industry is a global aggregate of public institutions and private corporations focused on research, technology, and manufacturing of products related to flight, atmospheric and beyond. Its scope in national defense, communications, and commercial air travel made aerospace a defining industry in past decades and it promises to be at least as important in the future. Within a decade, for instance, space tourism is predicted to become a multi-billion-dollar industry. Aerospace industry jobs range from assembly line workers to physicists. Titan Gilroy, founder of the company Titans of CNC, joins “On the Move” to discuss more on the world of aerospace as the “next frontier” to U.S. manufacturing, especially after working with companies like SpaceX and Blue Origin.

Trade/Tariffs

U.S. Commerce Department Updates Country Commercial Guides (U.S. Commercial Service). The U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Country Commercial Guides are a key starting point to find information about doing business overseas, detailing important factors to help a business decide if a market is right for its product or service. The guides are available for over 125 countries and prepared by trade and industry experts at U.S. embassies worldwide. Each guide provides trusted information about market conditions, opportunities, regulations, business customs, and more on dealing in foreign markets.

Opportunity Zones

New Mexico Economic Development Department Creates OZ Hub Website (New Mexico Economic Development). The New Mexico Economic Development Department (NMEDD) has unveiled a new website so local governments, investors, businesses, and property owners can take advantage and connect with Opportunity Zone resources. NMEDD has created this online hub to facilitate connection between resources and projects at all stages of development. The website includes a map to search for Opportunity Zone projects in specific counties, searchable project pipeline, and a list of Opportunity Funds. Projects can also be submitted to the NM OZ Project Portal. The projects are vetted by NMEDD, summarized and sent out to an email distribution list comprised of resources, investors, funding agencies and local governments. In addition, projects are connected to FundIt-Community, an inter-agency task force of state and federal funding agencies.

Developers, Investors Race to Capitalize on Opportunity Zones (Indianapolis Business Journal). The federal Opportunity Zones initiative, designed to spur investment in low-income communities nationwide, is still in its early stages—but it’s already grabbed the attention of local developers and investors. Perhaps the largest central Indiana project using opportunity zone funding so far is Waterside: a 103-acre, $1.4 billion mixed-use development that Indianapolis-based Ambrose Property Group plans to build at the former GM stamping plant just west of downtown. “It’s an exciting time, and the opportunity zone designation played a big role in making this project possible,” Ambrose founder and CEO Aasif Bade said. Ambrose is seeking to raise a $350 million opportunity zone investment fund. For more information on Opportunity Zones, CDFA has extensive resources available, click here.

Opportunity Zone Explorer Tool Available (Opportunity360). The Opportunity360 team created the Opportunity Zone Explorer to help those interested in opportunity zones determine which tracts in their state or region have been designated and how they relate to other federal programs and designations. In addition, users can filter tracts using several Outcome Indices to see how people living in these tracts are faring across five outcome dimensions and explore tracts that were eligible but not designated by the states as Opportunity Zones. The tool also provides a link to a measurement report providing additional details about the tract.

The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.

Inclusive Growth

The Good that Comes with Gentrification Outweighs the Bad (Federal Reserve Bank of Philadelphia). The Philadelphia Federal Reserve Bank used data from the American Community Survey to study the impacts of gentrification on residents in the 100 largest U.S. metropolitan areas. They find that gentrification increases total out-migration among less-educated renters by 4 to 6 percentage points and by slightly less for other renters and homeowners over a 10-year period. The authors point out that these effects are relatively modest since 70% to 80% of renters migrate to new neighborhoods over the same time span. Therefore, the study finds no evidence to suggest that gentrification has negative employment or income effects on residents who leave, but they note that there are unobservable costs such as moving costs and loss of proximity to friends and family. Meanwhile, original residents who stay in the neighborhood benefit from less exposure to neighborhood poverty and higher home values. The study also find some evidence that gentrification increases the likelihood that children of less-educated homeowners who stay will attend and complete college. On balance, the study concludes, the benefits of gentrification outweigh the costs.

Innovation

List of Top 10 Emerging Technologies Announced (World Economic Forum). An international Steering Committee of leading technology experts, sponsored by the World Economic Forum, engaged in a process to identify Top Emerging Technologies. After soliciting nominations from additional experts around the globe, the Steering Committee evaluated dozens of proposals according to several criteria: Do the suggested technologies have the potential to provide major benefits to societies and economies? Could they alter established ways of doing things? Are they still in early stages of development but attracting a lot of interest from research labs, companies or investors? Are they likely to make significant inroads in the next several years?The final list includes: Bioplastics for a Circular Economy – Social Robots – Tiny Lenses for Miniature Devices – Disordered Proteins as Drug Targets – Smarter Fertilizers to Reduce Environmental Contamination – Collaborative Telepresence – Advanced Food Tracking and Packaging – Safer Nuclear Reactors – DNA Data Storage – Utility-Scale Storage of Renewable Energy.

Infrastructure

Seven Lessons on Fixing the Digital Divide (Federal Reserve Bank of Kansas City). A new report from the Federal Reserve Bank of Kansas City focuses on broadband access, economic impact, and solutions for communities to narrow the digital divide. The digital divide refers to the gap between those with and without access to affordable, reliable broadband and the skills and equipment to utilize it. Today, many regions of the U.S. are left without broadband; the Federal Communications Commission indicates broadband is not available to nearly 25 million people. Just 53 percent of adults with incomes less than $30,000 have broadband at home. Nearly 68 percent of people without broadband at home live in rural communities. Findings are organized by seven key themes that emerged throughout the study. Each theme combines relevant research and statistics, and examples of how the issue plays out in our communities. The themes include: Awareness; Change; Rural Broadband; Broadband Adoption; Digital Skills; Equipment; and Evaluation and Collaboration.

Broadband Availability

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Deal Makers

Incentives in Action

Pennsylvania Revises Tax Credits After First State Evaluations (The Pew Charitable Trusts). Pennsylvania’s Independent Fiscal Office released evaluations of the state’s Historic Preservation, Film Production, and New Jobs Tax Credits—the first of IFO’s statutorily-required tax credit reviews. And, according to a new Pew Charitable Trusts’ analysis of these reports, several of IFO’s recommendations are already reflected in policy decisions by the state. For example, Governor Tom Wolf approved H.B. 262 implementing several reforms aligned with recommendations from these reports. The passage of this legislation demonstrates that program reviews like the ones conducted by the IFO can help guide substantive policy change. With the publication of these studies, Pennsylvania joined an increasing number of states producing evaluations that look at whether tax credits are producing the desired results—and that offer recommendations on how they might be strengthened.

New Nebraska Economic Development Director Named (Omaha World Herald). Governor Pete Ricketts announced that Lincoln businessman Tony Goins will become the fourth economic development director of his administration. Goins is currently director of branded products for Lincoln Industries, where he leads a sales team responsible for aftermarket truck and Harley-Davidson parts. He is also chief executive officer and a partner in the Capital Cigar Lounge and leads a consulting firm, Business Optimizer and Partners LLC. Goins was formerly the chief operating officer and executive vice president of Cabela’s World’s Foremost Bank and vice president of Cabela’s Retail Corp. before the company was bought out. “Tony understands what it takes to build organizations and recruit new investments to the state.” Ricketts said. “With his talent and experience, we will continue to lead the nation in new projects, build Nebraska’s brand around the world, and keep bringing great job opportunities to the state for the next generation.” Goins is scheduled to start on October 7.

Empire State Development Approves $1.3 billion Belmont Arena Project (Long Island News 12). New York’s Empire State Development board unanimously voted in favor of a $1.3 billion project for a new Islanders arena to be located at Belmont Park. Approval for the new arena and entertainment complex means work could begin soon on the project. Developers of the project plan to build a 19,000-seat arena, upscale shops, restaurants, and a hotel on the vacant property at Belmont. The approval paves the way for the return of hockey’s New York Islanders from Brooklyn. The project is expected to generate an estimated $858 million in revenues and create thousands of jobs.The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.

New Growth Opportunities

Best Practices in Bioscience Economic Development (Biotechnology Innovation Organization). The bioscience industry has come to play a central role in the economic development priorities of states, cities and municipalities. The BIO Economic Development Best Practices Report is a catalog of state and regional economic development initiatives along with best practice examples that highlight critical facets for a high-performing industry with long-term success. Four key building blocks for bioscience company creation and expansion include: Access to angel and venture capital – States and regions continue to address the continuum of capital needs by providing new sources of funds and other forms of financial assistance; Workforce development initiatives – State workforce programs, community colleges, and universities are expanding programs to expand the supply of qualified workers across the educational spectrum; Technology transfer systems – Innovation partnership models among industry, academia and state government are taking many forms, with the hope that that they will generate new products and companies and develop into successful bioscience clusters; and State of the art facilities – A variety of public and private partners are coming together in many states to invest in state-of-the-art research facilities and innovation centers.

Talent Development/Attraction

Maps Reveal Where the Creative Class Is Growing (CityLab). The creative class now makes up more than half the workforce in several metros. The creative class is defined as the collection of occupations that specialize in the novel combination of knowledge and ideas to solve problems or create value. Established tech hubs like San Francisco, San Jose, and Washington D.C. continue to lead the nation in their concentration of the creative class. But Baltimore and Philadelphia also boast high concentrations, attesting to the power of the east coast corridor. Once-lagging Rustbelt and Sunbelt metros like Pittsburgh, Cincinnati, Salt Lake City, and Las Vegas have also seen substantial creative-class growth over the past dozen years.

Important Principles for Strong STEM Pathways (US Chamber of Commerce Foundation). Successful career pathways are created through deep and meaningful coalitions of organizations. These coalitions bring education, community members, and business leaders together with a shared dedication to meeting society’s biggest challenges in a responsible, sustainable, and profitable way. They blur the lines between formal education, community service, workforce development, and economic development. To create a successful coalition-led career pathway, in STEM or other disciplines: Be Unique; Include Real-World Experiences; Breakdown Barriers; Understand the Difference; Think Differently; Use Research; Empower Students; and Leave a Legacy. The U.S. Chamber of Commerce Foundation’s Talent Pipeline Management (TPM) initiative is based on these principles. They work with states and regions to build partnerships and coalitions so that initiatives to prepare youth for the jobs of tomorrow are led by the employers who will employ them one day.

Latest News

* SEDE Network Testifies at IRS Hearing on Opportunity Zones *
Mark Troppe testified on behalf of the SEDE Network at an IRS hearing on Opportunity Zones held on July 9, 2019. This second public hearing for the second round of Opportunity Zone proposed regulations showed that the program’s staunchest advocates are still hoping the federal government will make changes to the rules before they are finalized. The group testifying was made up largely of attorneys, accountants and developers who are trying to make use of the program. Many testified about specific language in the last set of regulations that creates barriers to achieving hoped-for objectives. For more on the hearing, click here. Specifically, the SEDE Network testimony, signed by 16 state executives, made 5 key points and expressed the Network’s desire for changes that enable the program to serve both real estate development and the fostering of operating businesses and attracting investment to both.

Read the SEDE Network Testimony to the IRS

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State Economic Performance

Entrepreneurship in States: Fostering a Startup-Friendly Economy (National Governors Association). States are increasingly devoting more attention to an important, yet sometimes overlooked, tool for economic development: fostering entrepreneurship. Entrepreneurship can help overcome economic challenges – from growing global competition to lagging rural areas – as well as vocational barriers. There is an opportunity to spark entrepreneurship in young adults who are disconnected from the workforce, in mid-career adults and retirees seeking new opportunities, and in parents who desire flexible employment options. The National Governors Association (NGA) released a comprehensive report, Entrepreneurship in States: Fostering a Startup-Friendly Economy. In this report, NGA has provided cases highlighting state visioning, data collection, financial amenities, regulatory approaches, broadband needs, rural programming, targeting underserved communities and more. For instance, the report identifies that an important issue for the success of state entrepreneurship initiatives is determining how the state EDO can best function together with regional and local entrepreneurial support organizations to support entrepreneurial communities in the state. Successful entrepreneurial communities tend to have cultures that allow for the easy creation and existence of public-private partnerships (PPPs), so it is in a state’s interest to reach out to the private and nonprofit ESOs that operate entrepreneurial spaces and networks. Lack of a public-private culture can impede entrepreneurship and so must be addressed.

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Topics and Trends

Industry Watch

Types of Robots Every Manufacturer Should Know (National Institute of Standards and Technology). There is a lot of buzz these days in the manufacturing sector about robots — and how they can help manufacturers address challenges faced in today’s market, such as increased productivity and the scarcity of skilled workers. But what exactly do analysts and automation experts mean when they use the word “robot?” And how can different types of robots improve a manufacturing operation? This MEP blog post provides an overview of four types of industrial robots that every manufacturer should know. The MEP National Network is comprised of the National Institute of Standards and Technology’s Manufacturing Extension Partnership (NIST MEP), 51 MEP Centers located in all 50 states and Puerto Rico, and its over 1,300 manufacturing experts at over 400 service locations, providing any U.S. manufacturer with access to resources they need to succeed.

Trade/Tariffs

Breaking Through Trade Barriers (International Trade Administration). Trade barriers are government-imposed policies, practices, or procedures that unfairly or unnecessarily restrict U.S. exports or investments. Examples include discriminatory tariffs, where higher tariffs and taxes are assessed unfairly to U.S. exporters compared to foreign competition. There’s also border barriers such as burdensome customs procedures, technical barriers such as unfair testing requirements, and many others. Careful export planning—such as practical advice from your nearest U.S. Commercial Service office of the International Trade Administration (ITA)—can help avoid or mitigate potential problems. Companies can also directly report a trade barrier by using an online form. ITA’s market access, country, policy and industry specialists can help with trade barrier issues. Experts will evaluate and determine whether a company’s case involves a trade barrier or provide referrals to other federal agencies. This video is part of ITA’s Export Basics Series focused on Managing Challenges in Foreign Markets.

Opportunity Zones

Navigating Opportunity Zones: Community Partners Playbook (Local Initiatives Support Corporation). Opportunity Zones promise to drive billions of dollars in long-term investment into low-income urban and rural census tracts across the country. The goal of this new incentive, part of the 2017 Tax Reform and Jobs Act, is to achieve a double bottom line: fueling inclusive local economies that benefit the people who live and work there and providing a solid return to investors. But to make that happen, community stakeholders, state and local government leaders, investors and developers must work together to engage responsibly with this powerful but untested tool. The Local Initiatives Support Corporation (LISC), Council for Development Finance Agencies (CDFA), and Ford Foundation developed a playbook for community partners on Opportunity Zones which lays out possible trajectories and best practices. For more information on Opportunity Zones, CDFA has extensive resources available, click here.

HUD Bets on Tech Innovation for Opportunity Zones (DS News). The U.S. Department of Housing and Urban Development (HUD) has announced that it will co-lead an Opportunity Zone-focused workforce challenge of the U.S. Census Bureau’s “The Opportunity Project (TOP)” initiative. TOP is an accelerator program that matches tech companies, universities, government, and communities to create useful digital products for the public. The Census Bureau’s Opportunity Project utilizes the expertise of professionals from across government, the technology sector, and private business to focus on a specific challenge during designated ‘sprints.’ For this challenge, HUD said that it will collaborate with the private sector so that stakeholders in Opportunity Zones, including communities and investors, can use technology to strengthen investments in underserved areas. The final products for the challenge will be shared in Washington, D.C. in December 2019.

Treasury Wrestles with How to Measure Success in Opportunity Zones (Politico).Opportunity Zones have been hailed as a boon for the poor, and lambasted as a boondoggle for the rich, but how would anyone know for sure? There are no requirements that people participating in the potentially lucrative economic development program detail what they are doing, where they are doing it, and why they are doing it. The Treasury Department is now considering filling that gap with reporting requirements and has asked the public for recommendations as to what sort of information it ought to be collecting. Many groups are pushing Treasury to not only track how many jobs are being created and whether the program is reducing poverty, they also want the department to monitor things like whether affordable housing is becoming scarce in the zones and if the program is pushing low-income people out of their communities. Some want to know the extent to which investors consulted with residents in developing their projects, data on how many people from disadvantaged groups are hired, and whether investors are putting money into minority-owned businesses. That sort of detailed reporting would allow analysts to better understand how the program is working.

The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.

Inclusive Growth

State Scores for Promoting Opportunity 2019 (U.S. News & World Report). New Hampshire is the top state for providing opportunity, according to U.S. News & World Report measures. It is followed by Iowa, Minnesota, North Dakota and Maryland to round out the top five. The states were ranked in their capacity for providing opportunities for all their citizens. The U.S. News & World Report methodology shows rankings for each of the 50 U.S. states in 71 metrics across eight categories. The data behind the rankings aim to show how well states serve their residents in a variety of ways. To determine opportunity, three measures were considered: Affordability, Economic Opportunity, and Equality. Affordability measures the cost of living and housing affordability by comparing median incomes to median home prices. Economic opportunity tracks income inequality, median household income, poverty rates and food insecurity rates. Equality measures gender parity, racial inequality in education rates, income and unemployment rates, and more.

Innovation

Universities Search for New Funding to Make Up for Decreasing State Aid (State Science & Technology Institute). A decade since the Great Recession hit, state spending on public colleges and universities remains well below historic highs, despite recent increases. Overall state funding for public two- and four-year colleges is nearly $9 billion below the 2008 level, after adjusting for inflation. While highly ranked research universities have been able to adapt to declining subsidies by raising tuition, attracting out-of-state and international students, and sometimes raising funding from philanthropic sources, public universities outside of this top tier have not been able to replace lost dollars. Research from the National Bureau of Economic Research (NBER) examines the impact of declining state support for public research universities on their educational and research functions. The report notes that the quantity of undergraduate and graduate degrees awarded has been affected by budget cuts, and expresses concern that continued stagnation of state support for public universities will adversely impact both the supply of skilled workers with undergraduate and graduate degrees to the workforce and the long-term research capacity which contributes to economic growth.

Infrastructure

The State of the Nation’s Housing 2019 (Harvard Joint Center for Housing Studies).Although household growth is returning to a more normal pace, Harvard’s Joint Center for Housing Studies report on the State of the Nation’s Housing shows that housing production still falls short of what is needed, which is keeping pressure on housing prices and rents and eroding affordability. While demographic trends alone should support a vibrant housing market over the coming decade, realizing this potential depends heavily on whether the market can provide a broader and more affordable range of housing options for tomorrow’s households. Affordable payments are defined as requiring less than 31% of monthly household income. Concern about a rental affordability crisis has increased especially as cost burdens have moved up the income scale in many areas of the country. Households with incomes under $15,000 continue to have the highest burden rates, with 83 percent paying more than 30 percent of income for housing, including 72 percent paying more than 50 percent. Meanwhile cost-burden rates climbed 4.6 percentage points among households earning $30,000–44,999 and nearly 2.9 points among those earning $45,000–74,999.

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Deal Makers

Incentives in Action

Missouri and Kansas Near Cease-Fire Over Incentives (Wall Street Journal). Tired of fighting to attract business, Missouri and Kansas are nearing a truce in an economic border war that has cost hundreds of millions of dollars and created barely any new jobs. The agreement aims to ban tax breaks for companies that change addresses in greater Kansas City. Missouri Governor Mike Parson, a Republican, has signed legislation that would prohibit companies from receiving tax incentives for jumping the state’s border within the Kansas City region. Kansas Governor Laura Kelly, a Democrat, said she was prepared to sign an executive order agreeing to the truce. The legislation takes effect only if both parties agree.

Michigan Reorganizes Workforce and Economic Development Department (Crain’s Detroit Business). Michigan Governor Gretchen Whitmer signed an executive order which consolidates and reorganizes the state’s workforce and economic development department to meet Michigan’s business and labor needs. The E.O. combines the state’s workforce and economic development functions into the Labor & Economic Opportunity Department (LEO), formerly the Department of Talent and Economic Development (TED). In addition to the reorganization and renaming, the governor appointed Jeff Donofrio as the new director to lead the agency. The reorganized department will house the state’s leading economic development programs, including the Michigan Economic Development Corporation and the Michigan Strategic Fund. Whitmer said her changes will place an emphasis on workforce readiness and the traditional job-wooing and retention work of economic development.

Movie Making Returns to Mississippi with Expansion of Incentive Program (WLOX Jackson). The Mississippi legislature approved the revival of a film incentive package that expired in 2017, and it’s already drawing new movies to the state. Senate Bill 2603 allows Mississippi to offer rebates to motion picture production companies that work in the state. It allows for 25 percent tax rebates for non-resident cast and crew on films. Part of the incentives includes a commitment to hiring at least 20% locals and training them, a welcome opportunity for those who thought they would have to move off to live their filmmaking dream. One production impacted by the new incentive, Breaking News in Yuba County, was scheduled to shoot in Baton Rouge. It is being directed by Mississippi-native Tate Taylor who is now shooting the movie in Natchez and plans to keep making films in the state.

The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.

New Growth Opportunities

Development Finance for Food Systems (Council of Development Finance Agencies). CDFA’s Food Systems Finance White Paper Series demonstrates how traditional development finance tools can be used to support the growth of area food systems in order to demonstrate their viability as an asset class. The first publication in the series introduced food systems and development finance, while the second publication showed how efforts within the food system can gain access to capital to support the growth and expansion of businesses and projects. This latest release, Food Systems & Bonds, focuses on the ‘bedrock tool’ of development finance – bonds – and how this kind of financing can be applied to local and regional food systems. The paper provides an overview of bonds including the basic categories and types, as well as the players and processes involved in bond deals. The case studies section showcases numerous examples of bonds being used for food-related work.

Talent Development/Attraction

What People Look for in Jobs and Locations (Development Counsellors International). By understanding how people choose jobs and locations, communities can strategically market themselves to attract talent and win the war for talent. Most people are willing to move for the right reasons. In fact, nearly 85% said they would describe themselves as willing to relocate, either for a new job (48%) or for a better quality of life (34%). When assessing a location, talent prioritizes practical matters like housing cost, cost of living, healthcare and housing availability. While communities may not be able to “change” proximity to friends and family, what they can do is highlight their welcoming and friendly residents—which is the fifth most important factor for talent. Healthcare also remains a top factor for talent across all of DCI’s talent research. First-hand experience and word of mouth remain the dominant factors for forming community impressions, underscoring the importance of tourism. Internet research is also extremely important and is likely leaned on when there is no first-hand experience or word of mouth.

Best Cities for Jobseekers 2019 (Indeed). Choosing where to live and work is a complex decision. Personal preferences are certainly important, such as warm or cold weather, coastal living versus inland and proximity to friends and family. But there are some considerations that can make certain areas seem more desirable than others. These include cities where job seekers: face the least competition for jobs; command the highest salaries; work at the highest-rated companies; and face a low likelihood of unemployment. Based on these criteria, Indeed, one of the largest job sites in the world, reviewed its job-search and posting data to create this year’s list of the best cities for job seekers. Two California cities, San Jose and San Francisco, top the overall scores. Beyond that, every region of the U.S. made an appearance in the top 10. In the West, Salt Lake City ranks at number 10. Boston (number three) and Washington, DC (number nine) are the best cities for job seekers on the East Coast. Birmingham, Alabama (number four); Nashville, Tennessee (number five) and Oklahoma City (number eight) are the best Southern cities for job seekers, with Minneapolis-St. Paul (number six) and Milwaukee (number seven) representing the Midwest.

Latest News

* SEDE Members Meet to Plan Providence RI Convening *
A group of over 20 SEDE Network members met for a working lunch in Washington, DC to discuss critical issues of importance to state economic development executives and to plan the agenda for our Sept. 8-9 meeting in Providence, Rhode Island in conjunction with the SSTI conference.

Pictured in the photo from left to right: Ken Poole (CREC); Steve Spence (WV); Elaine Bedel (IN); Sally Rood (NGA); Jeff Chapman (Pew); Kelly Schulz (MD); Jason El Koubi (VA); Stefan Pryor (RI); Erran Persley (KY); Andrew Deye (OH); Kevin McKinnon (MN). Not pictured but in attendance: Christopher Chung (NC); Mark Hogan (WI); Lindsay Kirchinger (MI); Margo Markopoulis (IL); Jeff Mason (MI); Don Pierson (LA); Manuel Laboy Rivera (PR); Marty Romitti (CREC); Jacqueline Rosen (RI); Mark Troppe (CREC)

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State Economic Performance

Manufacturing’s Real but Patchwork Rebound (Economic Innovation Group). Manufacturing’s rebound is real. After shedding manufacturing jobs relentlessly between the turn of the century and the Great Recession, the United States has now added them in 82 out of 100 months since January 2011. Growth has continued in 2019, and by May there were 12.8 million employees in manufacturing in the United States, the most since December 2008. Such a turnaround is remarkable in a sector in which employment shrunk by nearly one-third between 2000 and 2010. Manufacturing’s expansion has been broad-based across regions, with improving manufacturing growth rates in 57% of counties. On average, counties in western states saw the highest annual growth rates from December 2016 to December 2018. The South created the largest number of new manufacturing jobs over the past two years.

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Topics and Trends

Industry Watch

Innovations Increase for Shrinking Agricultural Workforce (Farm and Dairy). A diminishing farm labor supply puts pressure on the agricultural sector to adopt new technologies for difficult-to-mechanize tasks. The competitiveness of U.S. agriculture, as well as the welfare of farm workers and the communities in which they live, depends on how the industry adapts to a new era of farm labor scarcity. Technologies that were relatively inexpensive to develop and adopt have been in commercial use for many years. The tightening of the farm labor supply today creates incentives to develop and adopt more challenging and more expensive labor-saving solutions. To address these challenges, engineers from academia and industry are developing “intelligent” robotic solutions, like automated lettuce thinners, integrated weed management systems and robotic apple harvesters.

Trade/Tariffs

Tariff Threat has Retailers Sounding Alarm (New York Times). Already battered by the e-commerce revolution, traditional retail stores are bracing for another blow — new tariffs on $300 billion worth of Chinese imports. Retailers and analysts warn the impact will be disastrous for an industry already tormented by vacant storefronts and deserted malls. The reason: Unlike earlier tariffs that mostly targeted industrial and commercial products, the next round is aimed squarely at consumer goods like footwear, toys and apparel. The National Retail Federation estimates that China supplies 42 percent of all apparel, 73 percent of household appliances and 88 percent of toys sold in the United States. So far in 2019, American retailers have announced plans to shut more than 7,000 stores, after announcing nearly 6,000 closings last year. By the end of 2019, announced closings could climb to 12,000 stores.

Opportunity Zones

EDA Prioritizes Applications for Projects Located in Opportunity Zones (U.S. Economic Development Administration). EDA evaluates all applications for funding to determine the extent to which they align with EDA’s investment priorities, address the creation or retention of high-quality jobs, leverage other resources both public and private, demonstrate the capacity to commence the proposed project promptly, and provide a clear scope of work with measurable project outputs. Adding OZs as a new investment priority will significantly increase the number of catalytic Opportunity Zone-related projects that EDA can fund to spur greater public investment in these areas. OZs join Recovery & Resilience; Critical Infrastructure; Workforce Development & Manufacturing; and Exports & Foreign Direct Investment as top federal economic development funding categories. To date, EDA has invested close to $30 million in 40 projects in designated Opportunity Zones to help communities and regions across the country build the capacity for economic development. For more information on Opportunity Zones, CDFA have extensive resources available, click here.

US Opportunity Zone Legislation Is Moving Capital (Real Capital Analytics). In business and economics there are few experiments available to show us that a policy goal is having an impact. Measuring capital flows based on tax changes is difficult because there are so many other variables which are not always observable. The U.S. opportunity zone program, however, provides a natural experiment to gauge the impact of new policy. For every low-income census tract that was selected for the opportunity zone designation, another three or so were left behind. The chart shows that in 2018 the sale activity for development-oriented type projects was falling in the non-OZ areas even as it grew in the Designated Opportunity Zones. The fact that development-related sales are growing in OZs as such activity is shrinking in the Also Rans is evidence that this program is not just a buzz item.

Five Credits and Incentives that Can Boost the Value of Qualified Opportunity Zone Projects (Orlando Business Journal). Opportunity zones are an important addition to the economic development toolbox, but they should not be viewed in a vacuum. There are ways that state and local incentives can increase the total benefits to QOZ projects, increasing project feasibility and improving return on investment. Important potential credits to incentives to complement OZ investments include: 1. New markets tax credits (NMTC); 2. Tax increment financing (TIF); 3. State job and investment credits; 4. Work opportunity tax credit (WOTC); and 5. In-kind contributions.

The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.

Inclusive Growth

Can Place-Based Incentives Help Poor Residents? (Smart Incentives). Place-based investment tax incentives have traditionally enjoyed significant bipartisan support, yet the empirical evidence is often disappointing to anti-poverty advocates when these incentives lack safeguards to protect poor communities. If the idea behind place-based incentives is that struggling individuals should be better off as a result, then it is necessary to build their needs into the process, specify the mechanisms for addressing those needs, and monitor and report on results. Among the ways to ensure more equity for residents is to link place to community by encouraging firms to engage more directly with communities through, for example, hiring members of the community or improving neighborhood conditions for the benefit of the community.

Innovation

Top Cybersecurity Companies to Watch in 2019 (Forbes). The top ten cybersecurity companies reflect the speed and scale of innovation happening today that are driving the highest levels of investment this industry has ever seen. Worldwide spending on information security products and services is projected to reach $124B in 2019, growing 8.7% over the $114B invested in 2018. The threatscape every business operates in today is proving the old model of “trust but verify” obsolete and in need of a complete overhaul. To compete and grow in the increasingly complex and lethal threatscape of today, businesses need more adaptive, contextually intelligent security solutions based on the Zero Trust Security framework. Zero Trust takes a “never trust, always verify, enforce least privilege” approach to privileged access, from inside or outside the network.

Infrastructure

States Losing Gas Tax Revenue on Electric, Hybrid Cars (National Conference of State Legislatures). Current electric vehicle sales only represent about 1 percent of all light-duty car sales in the United States, but as sales continue to climb, there are concerns this may lower gasoline tax revenues. Electric vehicles do not require gasoline to operate, so they don’t contribute to the upkeep of highways through a gas tax. Meanwhile, several major automakers, including General Motors, Ford, Volvo and Volkswagen, are making announcements to expand the development and production of plug-in and all-electric cars. In response, some states are seeking to raise registration fees for hybrid/electric vehicles (EVs). Over the past three years, 14 states have enacted annual fees for hybrid/electric vehicles (EVs) ranging from $50 for plug-in hybrids to $200 for fully electric cars. All total, 20 states currently have some sort of EV fee above and beyond normal car registration costs.

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Deal Makers

Incentives in Action

Use “Sunrise Analysis” for Designing Economic Development Tax Incentives (The Pew Charitable Trusts). When state legislators consider proposals for new economic development tax incentives, they face hard choices. Subtle differences in the design of business incentives can have a large impact on their effectiveness. By asking key questions at the outset through a “sunrise” process, policymakers can create programs that are more likely to achieve their goals. A sunrise process would address such questions as: Is there a clear rationale for the program? Is the incentive designed to achieve its stated goals? Does it minimize negative economic impacts? Does it include fiscal protections? Is it structured to be adequately and efficiently administered? The Pew Charitable Trusts discusses these questions and makes suggestions for how Rhode Island could create such a process in a recent memo. This practice would augment the state’s existing tax incentive evaluation process, which studies the effectiveness of tax incentive programs once they have been implemented.

Alabama Provides State Incentive for OZ Investments (Opportunity Alabama). Alabama Gov. Kay Ivey recently signed the Alabama Incentives Modernization (AIM) Act giving state taxpayers a capital gains tax reduction for opportunity zones (OZ) investments, conforming the Alabama tax code to the Internal Revenue Code on OZs. The AIM Act also allows the state’s Department of Economic and Community Affairs to reach agreements with qualified opportunity funds (QOFs) to offer impact investment tax credits to investors in case the projects undertaken by the QOF don’t produce expected returns by the fifth year, with the provision that “extraordinary returns” are allocated back to the state. There is a $50 million annual cap on the credits.

Indiana Makes Tax Credit Change to Boost Out of State Venture Capital (Indianapolis Business Journal). Indiana has offered its venture capital investment tax credit since late 2003 as a way to make investing in startups less risky, but it only benefited Indiana residents because it applied to an individual’s state tax liability. That meant investors who didn’t pay Indiana taxes were left out. Starting in 2020, investors will be allowed to transfer the tax credit, which means out-of-state investors can essentially sell the credit to someone in state who can take advantage of it. Leaders in the tech community say that is a big win for their industry, because it will help motivate out-of-state individuals—who regularly ask about the tax credit—to invest in Indiana startups.

The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database click here.

New Growth Opportunities

AI, Blockchain will have ‘Transformational’ Impact for Healthcare in Next 3 Years (Accenture). The healthcare industry is among the most labor dependent. Technology offers a new opportunity for the workforce to operate at a new level of efficiency. The possibilities in healthcare are vast. Imagine AI helping to scan structured data, such as medical claims; semi-structured data, such as XML; and unstructured data (e.g., medical records, email) in seconds to perform a clinical review which would otherwise require a human to read hundreds to thousands of pages. Extended reality and artificial intelligence can help surgeons with pre-surgical planning and provide a critical overlay of information during a procedure. The majority of healthcare organizations are now experimenting with at least one of these emerging technologies: distributed ledgers, artificial intelligence, extended reality or quantum computing. A larger majority (68%) of healthcare executives believe the combination of these technologies will have a “transformational” or “extensive” impact on their organizations in the next three years; and nearly all (94%) of the surveyed healthcare executives said they believe emerging technologies have accelerated the pace of innovation in the industry.

Talent Development/Attraction

Empowering the New Mobility Workforce: Learning from Past Transformations (UC Davis Greenlight Webinar). New transportation technologies will change the way we travel, live, and work. It is estimated that transportation employers will need to hire 4.6 million workers—1.2 times the current transportation workforce—in the next decade. Driving these changes are new technologies – such as vehicle automation and new mobility services – but this is far from the first time that automation and new technology have changed a sector of the economy. The webinar, hosted by the UC Davis Institute of Transportation Studies, explores past technological transformations and what they can teach us to expect for the next one. The webinar also discusses the new book, Empowering the New Mobility Workforce: Educating, Training, and Inspiring Future Transportation Professionals, and how leaders in education, industry and government can work together to create an ecosystem that facilitates learning and upskilling for emerging and incumbent transportation workers.

Manufacturing as a Career Path: Opportunities and Insights for State Legislators (NCSL Webinar). We have all seen reports about millions of good manufacturing jobs going unfilled. These jobs frequently provide high wages with benefits, yet many regions struggle to find qualified candidates. Advocates are working hard to illustrate how manufacturing jobs provide access to good careers with opportunities for creativity, engagement with new technology, and innovative and rewarding work. This webinar, hosted by the National Conference of State Legislatures, engages thought leaders in workforce and talent development to discuss trends and opportunities in manufacturing careers and steps that legislators and other state leaders can take to raise awareness and stakeholder engagement.