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State Economic Development Bulletin
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How Will New EDA Grant Funds Be Used: Identifying Priorities (SEDE Network/EDA Webinar). The State Economic Development Executives (SEDE) network in cooperation with the U.S. Economic Development Administration (EDA) hosted a December 14, 2021, joint webinar on American Rescue Plan Act (ARPA) spending by states and local governments. Presenters from SEDE, the National Conference of State Legislatures and National League of Cities discussed research findings, cases, guidelines, and opportunities related to the myriad streams of funding. This included a discussion of the U.S. Treasury Relief Programs, where ARPA is providing $350 billion of relief to state, local, and Tribal governments to enable them to continue to support the public health response and lay the foundation for a strong and equitable economic recovery. ARPA also provided $3 billion in supplemental funding to U.S. EDA for several major new grant programs, which were also discussed. The joint SEDE/EDA webinar included both SEDE members and an EDA audience. For the webinar slides, click here.
Related to this discussion was the announcement of the first-round awards for the Build Back Better Regional Challenge. The Economic Development Administration announced sixty finalists for Phase 1 of the American Rescue Plan’s $1 Billion Build Back Better Regional Challenge on December 13, 2021. Each finalist will receive approximately $500,000 to further develop their proposed projects and strengthen their regional growth clusters in advance of submitting a Phase 2 application. EDA will ultimately award 20-30 regional coalitions between $25 and $100 million to implement 3-8 projects that support an industry sector. State support for these efforts – providing assistance in removing barriers and engaging partners – will be critical to enhancing the projects’ success. With more than 500 proposals submitted, there are undoubtedly many good ideas that were not selected in this competition. As state leaders, please consider encouraging leaders in those regions to connect with EDA regional officials to explore other options for funding through EDA and other agencies. For more information, click here.
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State Economic Performance
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Employment Increased in 48 states and DC (Bureau of Labor Statistics). For the year ended in October 2021, nonfarm payroll employment increased in 48 states and the District of Columbia and was essentially unchanged in 2 states. The largest job increases occurred in California (+811,200), Texas (+661,300), and Florida (+428,600). An additional 7 states had employment increases of 150,000 or more. The largest percentage increases in employment occurred in Hawaii (+10.5 percent), Nevada (+7.6 percent), and Massachusetts (+5.9 percent). These data are from the BLS Current Employment Statistics program and are seasonally adjusted.
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* Economic Outlook *
U.S. Firms Battle Inflation and Worker Shortages
The Federal Reserve “Beige Book” released December 1, 2021, compiles anecdotal evidence derived from business contacts nationwide, shows prices rose at a moderate to robust pace, with price hikes widespread across sectors of the economy. There were wide-ranging input cost increases stemming from strong demand for raw materials, logistical challenges, and labor market tightness. Fed Chair Jerome Powell told the U.S. Senate Banking Committee that the central bank will consider speeding up the end of its bond-buying program a few months earlier than anticipated on the back of broadening price pressures, accelerating economic growth, and strong job gains that have not been matched by an increase in labor supply. He echoed concerns about persistent inflation with the present rate running at over 6%, well above the Fed’s flexible target of 2% annually.
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How COVID-19 is Reshaping Supply Chains (McKinsey & Company). McKinsey conducted a 2020 survey where just over three-quarters of respondents planned to improve resilience through physical changes to their supply-chain footprints. By this year, an overwhelming majority (92 percent) said they had done so. The survey also revealed significant shifts in footprint strategy. Last year, most companies planned to pull multiple levers in their efforts to improve supply-chain resilience. In practice, companies were much more likely than expected to increase inventories, and much less likely either to diversify supply bases (with raw-material supply being a notable exception) or to implement nearshoring or regionalization strategies. However, significant blind spots remain in most companies’ supply-chain risk-management setups. Just under half of the companies say they understand the location of their tier-one suppliers and the key risks those suppliers face. But only 2 percent can make the same claim about suppliers in the third tier and beyond. That matters because many of today’s most pressing supply shortages, such as semiconductors, happen in these deeper supply-chain tiers.
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Global Economic Outlook 2022-2023 (Organization for Economic Cooperation and Development). According to the Organization for Economic Cooperation and Development (OECD), the global recovery continues to progress but has lost momentum and is becoming increasingly imbalanced. Parts of the global economy are rebounding quickly. The output in most OECD countries has now surpassed its late-2019 level and is converging on its pre-pandemic path. Employment in the United States is still below pre-pandemic levels, whereas the Euro Area is now higher than its pre-pandemic level. At the same time, United States GDP has recovered faster than Europe’s. However, others are at risk of being left behind, particularly lower-income countries where vaccination rates are low, and firms and employees in contact-intensive sectors where demand has yet to recover fully. Inflation also looms as a challenge to widespread global recovery. OECD expects inflation to peak at the turn of 2021-22 before receding gradually to around 3% by 2023.
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New 20-Story Project Planned in New York Opportunity Zone (The Real Deal). Arden Group is planning to turn a New York City parking garage into a large residential building as developers rush to capitalize on a major city rezoning there. The Philadelphia-based developer filed plans with the city for a 20-story, mixed-use building spanning 351,000 square feet with 222 residential rental units at 4650 Broadway Avenue in Manhattan. The company was able to raise $18.5 million in equity through its Opportunity Zone fund, and secured a $44 million loan from Scale Lending, an arm of Slate Property Group and Carlyle Group, to purchase the property. The area was rezoned in August 2018, with the goal of bringing 5,000 new units of housing to the neighborhood. The rezoning was delayed for years by activists’ lawsuits, but the de Blasio administration prevailed, and builders are moving forward with their projects. Under the city’s Mandatory Inclusionary Zoning law, at least 25 percent of the residential units built in the rezoned area must be income restricted.
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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.
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Leading with Energy Equity (American Council for an Energy-Efficient Economy). Low-income communities and communities of color stand to benefit from clean energy investments, healthier housing, and local job creation; however, they often are unable to take full advantage of clean energy opportunities. For example, low-income households have less access to upfront capital to make clean energy investments, frequently rent their homes and therefore have limited control over their energy systems and are often excluded from policy development and planning processes. Research has found that low-income households living in both single and multifamily buildings are consistently overburdened not only by high energy bills but also by the environmental and health impacts of energy generation. ACEEE’s Leading with Equity Initiative seeks to define and drive toward equitable energy efficiency policy and programs at the state, local, and utility levels. The report identifies efforts taken for a shared vision of an equitable energy system, discusses barriers and leverage points to collect equity-related data, and identifies areas of agreement on how to prioritize equity-focused metrics.
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Science and Engineering State Profiles (National Science Foundation). The National Science Foundation (NSF) has released Science and Engineering State Profiles, an interactive website providing access to state-level data on science and engineering (S&E) personnel, finances, and state rankings. Data are available from surveys sponsored by NSF’s National Center for Science and Engineering Statistics (NCSES) covering employed science, engineering, or health (SEH) doctorate holders; S&E doctorates awarded, including by major S&E fields; SEH graduate students and post doctorates; federal research and development obligations by agency and performer; state government agency R&D expenditures; total and business R&D performance; and higher education R&D performance, including by major S&E fields. Other data sources available include population, civilian labor force, per capita personal income, federal expenditures, patents, small business innovation research awards, and gross domestic product. Data cover 2003 to present and are available for download.
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Billion-Dollar Weather and Climate Disasters Climb (National Oceanic and Atmospheric Administration). Our deepest sympathies go out to those impacted by the devasting December tornadoes. The tornado tragedy adds to a growing list of disasters this year, which disrupts both lives and state economies. In 2021 (as of October 8), there have been 18 weather/climate disaster events in the U.S. with losses exceeding $1 billion. Disaster resilience is a critical infrastructure consideration. Every state in the country has been impacted by at least one-billion-dollar disaster since 1980, ranging from more than 100 of these events across Texas to one event in Hawaii (Hurricane Iniki in 1992). The Central, South, and Southeast regions typically experience a higher frequency of billion-dollar disasters than other regions. The number and cost of disasters are also increasing over time due to a combination of increased exposure (i.e., values at risk of possible loss), vulnerability (i.e., where we build; how we build) and that climate change is increasing the frequency of some types of extremes that lead to billion-dollar disasters. These trends are further complicated by the fact that much of the population and economic growth has taken place in vulnerable areas like coasts and river floodplains.
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* SEDE Network Report *
Integrating Equity into Incentive Metrics
State and local experts and practitioners discussed emerging approaches to measuring and reporting on diversity, equity, and inclusion impacts within incentive programs during the SEDE Network roundtable program, Integrating Equity into Incentive Metrics. This topic is a work in progress for the economic development field. Leaders are still figuring out the right way to obtain the right data for the right metrics to allow them to answer the questions about incentive use that are being raised in their communities. The roundtable provided the opportunity to share ideas about where we are and what we’ve learned to date. This article describes takeaways from the roundtable presentations. To dive deeper and see examples of these ideas in practice, please access the full slide deck, click here. To listen to the recording, click here.
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Michigan Advances Major Incentive Program (Governing). Michigan lawmakers advanced legislation that would create a large state incentive program to attract and retain more businesses in an increasingly competitive climate. The Strategic Outreach and Attraction Reserve — which would be funded by the Legislature — would distribute money to the proposed Michigan Strategic Site Readiness Fund and the Critical Industry Fund. The Strategic Site Readiness Fund would provide aid to businesses for items such as land acquisition, site preparation, infrastructure improvements, demolition or rehabilitation of a site, environmental remediation and some fees related to engineering, surveying, or architecture. The Critical Industry Fund would help to pay for costs such as gap financing, deal-closing, or workforce training. When asked what prompted the program, House Speaker Jason Wentworth referenced Ford Motor’s decision in September to partner with SK Innovation to invest $11.4 billion and create 11,000 jobs in an electric truck plant, three battery plants and a supplier park to be divvied between Kentucky and Tennessee. “I think that sent shock waves through our state, and we need to make sure that we have the resources and the tools available to be competitive,” Wentworth said.
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State Tax Incentive Evaluations Database (National Conference of State Legislatures). State tax incentives continue to be on state legislative agendas and more and more lawmakers have expressed interest in having good information on the impact of incentives. As a result, states across the country are starting to gather data and use evidence to systematically evaluate tax incentives. To illustrate what sort of evaluations states are conducting, NCSL, with the support of The Pew Charitable Trusts, created a database of state tax incentive evaluations. Evaluations published since the start of 2008 are included with more reports added over time. The tool allows users to search for state evaluations by analysis topic, type of incentive, state, and year. Users may choose as many terms in each category as desired. The results are displayed by state with a link to the evaluation produced by the state, the year the evaluation was published, and the evaluation’s analysis topics and incentive types.
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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.
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Maine Strengthens Connections with Economic Development Districts (NADO/CREC Webinar). As pandemic recovery continues throughout the United States, there is a tremendous opportunity right now to better coordinate economic development planning efforts at the state and regional levels to drive prosperity and resilience. The National Association of Development Organizations (NADO) Research Foundation and Center for Regional Economic Competitiveness (CREC) hosted a webinar highlighting how state economic development offices and regionally based Economic Development Districts (EDDs) can better align their efforts by coordinating statewide economic development plans and regional Comprehensive Economic Development Strategies (CEDS). The webinar features how the Eastern Maine Development Corporation, located in Bangor and serving four counties, has forged a strong partnership with the Maine Department of Economic and Community Development – an example of an EDD-state government collaboration that is leading to powerful outcomes for residents and businesses.
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* SEDE Network Event *
Regional Leadership Discussion Held
On December 7, 2021, the Center for Regional Economic Competitiveness (CREC) and the U.S. EDA Denver Regional Office convened a Regional Leadership Discussion among economic development leaders from nine states. Special thanks to Stefan Pryor (RI Secretary of Commerce and SEDE Chair) and Angie Martinez (Director of EDA’s Denver Regional Office) for hosting the event and providing important context-setting remarks for attendees, who represented local economic development districts and state agencies. The event featured great discussion with state participants offering thoughts on how they are using the State Planning Grants, state-local collaboration, and the EDA grant application process (among other topics) including numerous compliments for the Denver staff. Based on the success of this event, CREC is in discussions with EDA to consider scheduling additional regional discussions in 2022.
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Talent Development/Attraction
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U.S. Workforce Falling Behind in Digital Skills (Information Technology and Innovation Foundation). The U.S. workforce is becoming less digitally-savvy compared to workers in other nations, with American employees lagging in skills like basic computer literacy and using messaging tools like email. According to data compiled by the Information Technology and Innovation Foundation (ITIF), roughly 31 percent of employees in the U.S. workforce have either no or limited digital skills. A lack of digital skills was particularly noted in construction, transportation, health, and manufacturing industries. Additionally, the U.S. ranked 29th in terms of students engaging in operating systems, cloud computing, and mathematics courses out of 100 countries. Some of the countries ranked ahead of the U.S. include Switzerland, Luxembourg, Japan, Germany, Italy, and Taiwan. This gap stands to hold the U.S. economy back as the world rapidly shifts to digital workflows.
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Workforce Development Provisions in Build Back Better Act (Congressional Research Service). The Congressional Research Service issued a report on funding for workforce development and national service efforts included in the Build Back Better Act (BBBA, H.R. 5376), as passed by the House in November 2021. Funds would typically be appropriated for FY2022 and would remain available for the periods specified in the bill. The funding generally reflects three approaches: supplemental funding for existing programs and activities, supplemental funding placing an emphasis on climate resilience and mitigation activities, and funding for new programs and activities. An example of a new program is Part I of Subtitle C which establishes a new competitive grant program to support the development and expansion of sector partnerships to expand training and employment services in specified industries.
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Under Secretary Davin’s leadership, DCED launched critical economic development initiatives like the PA Business One Stop Shop, the Manufacturing PA initiative, and the new branding of Pennsylvania with “Pursue Your Happiness,” and “Work Smart. Live Happy.” He has also achieved success in attracting corporations to Pennsylvania, including major international projects like the Royal Dutch Shell plant in Beaver County. Prior to his appointment, Secretary Davin served as Director of Allegheny County Economic Development and the Director of the Allegheny County Redevelopment Authority. His experience also includes Executive Director of the: Industrial Development Authority, Hospital Development Authority, Higher Education Building Authority and Residential Finance Authority.
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The SEDE Network Steering Committee includes: Stefan Pryor (RI), Chair; Sandra Watson (AZ), Vice Chair; Julie Anderson (AK); Mike Preston (AR); Kurt Foreman (DE); Don Pierson (LA); Kelly Schulz (MD); Kevin McKinnon (MN); Chris Chung (NC); Alicia Keyes (NM); Michael Brown (NV); Andrew Deye (OH); Dennis Davin (PA); Adriana Cruz (TX); Joan Goldstein (VT); Mike Graney (WV).
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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.
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