Driving Regional Economic Growth: Opportunities for Cook County

Presentation to the Economic Development Foundations Working Group

August 31, 2011 Robert Weissbourd

Agenda

It’s One Economy “Metro-Economics” Opportunities for Cook County Key Lessons and Next Steps Discussion

Origins: From “Equity” to … “Equity”

Civil Rights Empowerment Economic Development: Assets Economic Development: Markets Putting the Economics in Economic Development

Poverty and Economic Development

“… poverty has no causes. Only prosperity has causes. Analogically, heat is a result of active processes; it has causes. But cold is not the result of any processes; it is only the absence of heat. Just so, the great cold of poverty and economic stagnation is merely the absence of economic development. It can be overcome only if the relevant economic processes are in motion.” -- Jane Jacobs Photo from Shelf-Basin Interactions

Neighborhoods are Nested in Larger Systems Which Drive the Flows of People and Capital

Neighborhoods arise from the interaction of regional economic, social and political systems with physical place.

Market Failure in Lower Income Communities

Connectedness

•

Employment networks

•

Entrepreneurial opportunities

•

Business, real estate investment

•

Expanded products and services

•

Competitive, healthy communities Poverty Productivity

•

Undervalued, underutilized assets Isolation LIC economic development reconnects poorer people and places to the economic mainstream.

The Pieces of Economic Development …

Succeed or Fail “In Context” of Each Other

Infrastructure Business Development Education Housing Sustainability Workforce Training Strategic economic development designs and delivers the programs to create a whole greater than the sum of the parts.

Why Metros?

Economic Geography and Place-Based Development

The Goal is Economic Growth

 Goal is economic development - that is

inclusive

and

sustainable

.

 Metros are the means, not the ends

Why Metros?

Economic Geography and Place-Based Development

The Goal is Economic Growth Economic Growth Flows from Market Activity

 The outputs we care about sector activity – jobs, income, assets, sustainability – are primarily a function of the complex interaction of housing, labor, business and other market systems, enabled and shaped by government and civic  Goal is to improve performance of these systems

Why Metros?

Economic Geography and Place-Based Development

The Goal is Economic Growth Economic Growth Flows from Market Activity Major Market Systems Operate at the Metro Level

 System performance is function of interactions of people and firms in context of characteristics of place – “on the ground.”  Key geography of many of these systems and interactions is metropolitan region. (Metro includes, but is more than sum of, its

neighborhoods

. Best neighborhood development deploys people and assets into metro economy, improving both.)  Indeed, one of main reasons for very existence of cities is the agglomeration benefits of concentrating economic activity – an effect of place on market performance.

Why Metros?

Economic Geography and Place-Based Development

The Goal is Economic Growth Economic Growth Flows from Market Activity Major Market Systems Operate at the Metro Level Improving Metro Economic Performance Entails Customized Analysis and Deliberate Activity

 System and environmental characteristics, opportunities and challenges “on the ground” vary by place.

 Particularly in the knowledge economy, increasing returns and imperfect competition are giving rise to specialization and divergence. It is more important than ever to be deliberate and strategic, as the economy no longer “takes care of itself.”

Why Metros?

Economic Geography and Place-Based Development

The Goal is Economic Growth Economic Growth Flows from Market Activity Major Market Systems Operate at the Metro Level Improving Metro Economic Performance Entails Customized Analysis and Deliberate Activity Economic growth entails strengthening metro economies, and that requires deliberate, ground-up, tailored activity.

Agenda

It’s One Economy

“Metro-Economics”

Opportunities for Cook County Key Lessons and Next Steps Discussion

66% 73% 75% 75%

Top 100 Metros Share of U.S. Total

94% 92% 78% 79% 76%

Sources: Brookings analysis of US Census Bureau, FAA, BLS, NIH, NSF, and BEA data; Brookings, ExportNation, 2010 (2008 data); Forthcoming research from Brookings and Battelle

How Metro Economies Grow

 Metro economy = total value of goods and services produced in the region  Growth is inherently business sector growth (number, size and profitability of firms)  Business sector grows through firm creation, growth and location decisions (retention and attraction)  Firm creation, growth and location depend upon increases in efficiency and productivity (of firm and system, including product innovation)

Core Question: What attributes of the region increase efficiency and productivity, leading to business sector growth?

What is it About Place that Affects Economic Performance?

New Growth Theory Economic Geography New Growth Theory Institutional Economics Act Comprehensively – The Whole is Greater than the Sum of the Parts.

Geography Customize.

Institutional Economics Develop Institutional Capacity and Intentionality.

What Drives Inclusive and Sustainable Economic Growth?

Local (Regional) Enabling Environment (Government regulation, tax and public goods, including particularly infrastructure and education; civic institutions; qualities of place, including the natural environment; etc.) Inputs to Production (Human capital; real estate; capital; natural and knowledge resources; etc.) Key Systems (Market processes – housing, labor, etc.; production dynamics – clusters, value chains, etc.; innovation dynamics - knowledge creation, networks, commercialization, etc.) Economic Outputs (Businesses – gross regional product, profits; households – wages, other income, etc.) Macro/Global Context & Trends

Leverage Points

Create Effective Public & Civic Culture & Institutions Enhance Regional Concentrations Leverage Points for Sustainable and Inclusive Prosperity Deploy Human Capital Aligned with Job Pools Increase Spatial Efficiency Develop Innovation Enabling Infrastructure

Economic Development in the Next Economy

Global, Knowledge Economy Specialization and Dynamism Intentionality Build on Your Assets Coordinated, Cross Sectoral, Flexible, Adaptive, Open, Information-Rich, Inclusive, Entrepreneurial Compete on Value-Added (not low-cost)

Metropolitan Business Planning: A New Way of Doing Business



Grounded in Economics and Business



Comprehensive, Actionable Strategies



An Ongoing Enterprise



Enables “New Federalism”

Northeast Ohio

Puget Sound

Pilot Metro Business Planning Regions

Minneapolis-St. Paul

Source: Brookings Institution

Agenda

It’s One Economy “Metro-Economics”

Opportunities for Cook County

By Leverage Point: Regional Status Exploring Roles for Cook County

Strong Assets

Chicago Region's GRP in Context

600 500 400 300 200 100 0 Source: International Monetary Fund

If the Chicago MSA were a nation, it would have the 20 th largest economy

Losing Momentum

1,04

Ratio of Chicago area per capita GRP growth to U.S., 1980-2009 30% Cumulative Job Growth, 1992-2008 U.S.

Chicago MSA 25%

1,02 23,2% 1,00

20%

0,98

15%

0,96

10%

6,3% 0,94

5%

0,92 0,90

1980 1985 1990 1995 2000 2005 0% 1992 -5% 1996 2000 2004 2008

Source: National Establishment Time Series Source: Moody’s Analytics; MCIC

“Strong Balance Sheet, but Poor Income Statement”

Lots of ED Activity; Little Coordination

Excelerate Labs Greater SW Development Corporation Choose DuPage IL Clean Energy Community Illinois Technology Association Board Chicago Technology Park

Source: Regional Economy Initiative, Metropolis Strategies and RW Ventures.

Chicago Biomedical Consortium DCEO Global Midwest Alliance CMAP Clean Economy Network iBio

Enhance Regional Concentrations: Industries, Occupations and Functions



What is it?

 How the firms and related institutions in the production side of the economy interact and concentrate, or “cluster,” influencing their efficiency and productivity 

Aspects to consider include:

 Current concentrations and their geography   Areas of high growth potential What shared inputs, activities, infrastructure and other factors contribute to efficiency/productivity of targeted clusters  Extent to which clusters have already self-identified and organized 

Strategies might include:

 Provide co-location opportunities (e.g., business parks)    Strengthen institutional and network infrastructure Cluster-specific training, R&D, infrastructure, finance, etc.

Cluster-specific innovation/entrepreneurship  Attraction of complementary firms

Regional Status: Strong but Underperforming

FIRE & Business Services Durable Goods Mfg Nondurable Goods Mfg Transportation & Warehousing Consumer Industries Utilities Construction Information & Media -30000 -25000 -20000 -15000 -10000 -5000 0

Local Share - Chicago Competitiveness, 2010

*Size of bubble represents 2010 Gross Output Sources: MCIC; Regional Economy Initiative, Metropolis Strategies and RW Ventures.

Headquarters 1,6 1,4 1,2  Diverse economy, with complementary specializations, in both conventional and functional clusters Health & Welfare Tourism 1 0,8  Many of the biggest clusters are growing more slowly than their national peers 5000 0,6 0,4  Strengths in logistics, business services, food processing, metal/machinery manuf., health care/life sciences, … 0,2 10000 0  Several groups are pursuing cluster studies, but few comprehensive, business driven cluster strategies are underway.

Exploring Roles for Cook County



In Its Own Businesses

 Support business formation and growth in County supply chains (e.g. Evergreen Cooperative Initiative…)  Strengthen green buildings cluster by retrofitting County buildings, driving demand for energy efficient products and services 

In Its Economic Development Programming

 Target programs (e.g., WIA, CDBG) to support the region’s most promising clusters, such as Freight and Logistics 

Through New Initiatives and Partnerships

 Lead organization and development activities in Health & Medical cluster

Preliminary and Illustrative: For Discussion Purposes Only

Deploy High Human Capital Aligned with Job Pools



What is it?

 Linked, mutually reinforcing human capital and job pools  Efficient labor market deployment  Opportunity and mobility 

Aspects to consider include:

 Concentrations and growth prospects (both skills and occupations)  Alignment of human capital and job market    Quality of education/training systems (K thru lifelong learning) Attraction/retention record and factors Labor market efficiency 

Strategies might include:

 Increase demand-side focus of workforce development   Increase access, reduce transaction costs in labor market Establish career pathways, apprenticeships, etc. to foster economic mobility  Target and link production, attraction, retention of workers and firms

Regional Status: Bifurcated

 Slightly above average in percent of knowledge workers  Attracting talent from around the world (as indicated by flow of high skilled immigrants) 100%

Percent of Population with At Least Each Level of Education

90% 80%  52% of all Illinois jobs are “middle skill,” but in 2008 there was a 9% shortfall in workers with the skills to fill them 70% 60% 50%  Production of human capital is mixed – world class universities, uneven community colleges, many failing elementary and high schools 40% 30% 20% 10%  HC development system fragmented and not sufficiently employer driven 0% Cook County City of Chicago Suburban Cook MSA Illinois USA High School Degree Some College or an Associate's Degree Bachelor's Degree Advanced Degree Sources: Brookings Top 100 Metros Metrics; Illinois’ Forgotten Middle- Skills Jobs, The Workforce Alliance, 2008; Graph based on data from U.S. Census Bureau, American Community Survey, 2005-2009 Estimates.

Exploring Roles for Cook County



In Its Own Businesses

 Use the County’s human capital system to model skill certifications, job ladders, mobility (focusing on healthcare and criminal justice) 

In Its Economic Development Programming

 Tailor workforce development and prisoner reentry programs to be more employer/market driven, and tie to needs of high-growth clusters (e.g., freight and logistics) 

Through New Initiatives and Partnerships

 Consolidated County-City workforce investment management

Preliminary and Illustrative: For Discussion Purposes Only

Develop Innovation-Enabling Infrastructure



What is it?

 New products, services and business models – the only long term driver of overall growth 

Aspects to consider include:

 Overall “ecosystem” – supporting institutions and networks     Performance at particular stages (R&D, commercialization, entrepreneurship) Cluster-specific innovation dynamics/opportunities Public-sector enablers/constraints Availability of stage-appropriate finance 

Strategies might include:

 Strengthen regional R&D capacity (education, facilities, funding)     Catalyze commercialization of knowledge through research industry linkages Foster entrepreneurship through capital access, technical assistance, mentorship Develop rich networks supporting interdisciplinary cross fertilization and deal formation Support cluster-based innovation

Regional Status: Underperforming, but Improving

$2 500 $2 000

Venture Capital Investments by State ($M) 2009 2010

Source: PWC MoneyTree $1 500 $1 000 $500 $  $575 $192 World class research universities and R&D centers, but limited commercialization  Uneven capital access for entrepreneurs (e.g. low SBA lending) 3,0 2,5 2,0 1,5 1,0 0,5  Average levels of business churn and low numbers of high impact firms  Limited innovation networks, ecosystem, culture (but emerging, particularly in IT/digital)

Total Patents Granted Index, U.S. v. Illinois

U.S.

IL Source: U.S. Patent & Trademark Office Sources: Regional Economy Initiative by Metropolis Strategies and RW Ventures; Brookings Top 100 Metros Metrics.

Exploring Roles for Cook County



In Its Own Businesses

 Develop key innovations related to County operations: digitalization of patient records; next gen. computer-based property assessment; hospital interpretive services; paperless permitting and electronic plan reviews 

In Its Economic Development Programming

 EDA innovation grants?



Through New Initiatives and Partnerships

 Work with other stakeholders to create R&D centers (e.g., patient records, foreclosure management, etc.)

Preliminary and Illustrative: For Discussion Purposes Only

Increase Spatial Efficiency



What is it?

 The geographic arrangement of households and firms – producers, suppliers and consumers – within the region determines transportation costs for people and businesses, and influences agglomeration benefits 

Aspects to consider include:

 Public policies re: land use/zoning, infrastructure, etc.

   Degree of housing-jobs mismatch Access to transit, commuting times, etc.

Spatial concentrations of firms, occupations, functions, etc.



Strategies might include:

 Focusing development in infrastructure-rich areas   Transit-oriented and mixed-use/mixed-income development Affordable housing programs (inclusionary zoning, etc.)   Avoid segregation and concentration of poverty Travel pricing strategies (e.g., congestion pricing)

Regional Status: Dense Nodes, but Stuck in Traffic

Housing Costs as Percent of Income Housing + Transportation Costs as Percent of Income

 79% of Northeastern Illinoisans have access to transit, BUT only 24% can use transit to access their jobs  The Chicago region is the 3 rd most segregated of the top 100 metros  Lack of funding for needed infrastructure improvements  Housing sprawl and lack of transit investment have led to the 4 th longest commutes to and from work, mostly by car  The metro area is the 3 rd most congested in the nation, costing the region $7.3 billion annually in wasted time and fuel Sources: Housing and Transportation Affordability Index by CNT; Brookings Top 100 Metros Metrics.

Exploring Roles for Cook County



In Its Own Businesses

 Provide employer assisted housing near large centers of County employment  Incent alternative modes of transportation (providing employees with transit benefits, free and secure bike parking, etc.) 

In Its Economic Development Programming

 Promote spatial efficiency through Building and Zoning  activities Use NSP, HOME and other funds to support transit oriented development and otherwise encourage spatial efficiency 

Through New Initiatives and Partnerships

 Coordinate with regional affordable housing initiatives

Preliminary and Illustrative: For Discussion Purposes Only

Create Effective Public & Civic Culture & Institutions



What is it?

 The institutional environment, made up of governments, private and civic associations, enables and influences the efficiency of economic activity 

Aspects to consider include:

 Degree of horizontal and vertical fragmentation    Tax/value proposition Governance: cross-sectoral partnerships; broader institutional capacity and culture; transparency, openness, responsiveness Information: availability and use of data for economic development 

Strategies might include:

 Inter-jurisdictional coordination/cooperation, including consolidation and shared services       Revenue sharing Strategic engagement of citizens, private and civic sectors (particularly program-specific, such as community policing) E-government Open data/data-sharing initiatives Permit/license fast-tracking Special-purpose entities

Regional Status: “C”



Government Coordination:

 1,226 units of government within the seven-county metro area.

  More governments per capita than 2/3rds of major metros Lack of public trust 

Tax & Regulation/Value Proposition

 Complex, multi-faceted tax and regulatory systems.   Value proposition uneven Illinois taxes fewer services than 46 other states and has a sales tax rate higher than 46 other states.



Governance

 Uneven – selectively cross sector, open and inclusive; often top-down and “who you know” 

Information Sharing

 The region is improving but still lags other metros in transparency and public data.

Sources: “The Economic Impacts of GOTO2040,” RW Ventures, 2010; Brookings Top 100 Metros Metrics; “Public Finance Issues in the Chicago Metropolitan Area,” CMAP, 2009.

Exploring Roles for Cook County



In Its Own Businesses

 Act as model of transparent government, including data sharing   Implement Government 2.0 practices to increase efficiency and encourage citizen engagement Lower the sales tax rate and expand the tax base to include many services   Improve and make more transparent the value provided for taxes Ensure sensible and consistent regulations and minimal bureaucracy 

In Its Economic Development Programming

 Pool funding within County programs and across other agencies for performance-based competitive grants 

Through New Initiatives and Partnerships

 Convene, participate with other governmental, private and civic actors in regional economic planning  Promote shared services agreements

Preliminary and Illustrative: For Discussion Purposes Only

Agenda

It’s One Economy “Metro-Economics” Opportunities for Cook County Key Lessons and Next Steps Discussion

High Road Development

Subsidies Low-wage Regulation Good Infrastructure Skilled Workers

Key Lessons



Undertake “high road” development

 Build from your assets  Compete on value-added, not just low cost  Tailor tax-value proposition 

Be intentional

 Customized, integrated, tailored to local opportunities  Metropolitan Business Planning 

Act in context

 Design for whole greater than the sum of its parts  Allow economics to dictate the geography  Align equity goals with economic development  Understand spectrum from social service to economic growth 

“Metros are the solution, not the problem”

 Federal and state governments should invest in metros.

Market Assessment Strategy Identification

Next Steps

Opportunities for the Region (with County “lens”)

Inventory assets and opportunities Identify high potential strategies integrating key market leverage points

Roles for the County

Evaluate Cook government programs and competencies Target strategies best suited to County business, programs, capacities

Program/Product/Policy Development

Coordinate and create initiatives to implement strategies Reorient existing programs, create new ones, coordinate to implement selected strategies

Institutional Capacity Building

Regional business planning/execution (gen. and project specific) •Convene, participate in RBP •“Governance for the next economy”

Preliminary and Illustrative: For Discussion Purposes Only

Discussion

Driving Regional Economic Growth: Opportunities for Cook County

Presentation to the Economic Development Foundations Working Group

August 31, 2011 Robert Weissbourd