Transcript Restarting Private Sector Job Growth in the Greater MSP

Restarting Private Sector
Job Growth in the Greater
MSP Metro Area
January 12, 2011
0
Agenda

Case for Change

What Drives Job Growth?

Strategies for Greater MSP
1
1
For the past 30 years, the Twin Cities
have enjoyed steady growth
U.S. average
Twin Cities
Midwest
Real income per
capita1
CAGR
2.0%
1.9%
1.9%
1980
1985
1990
1995
2000
2005
GDP per capita1
CAGR
1.7%
1.8%
1.4%
1980
1 In 2005 dollars
1985
1990
1995
2000
2005
2
The Twin Cities has an incredibly
strong private sector . . .
$425 billion
MSP has the 3rd most
Fortune 500
companies per capita
in the country
Revenue earned by Twin Cities
Fortune 500 companies
22
Fortune 500 companies
headquartered in the
Twin Cities
6th
Ranking among regions for
most companies in the
Fortune 400 private
companies list – including
Cargill and Carlson
3
. . . world-class research and strong
human capital . . .
5th among all states
in patents per
investment dollar
U of M is nationally
ranked #7 in patentrevenue generating
research
MSP has the 5th best percent of advanced
degrees among MSAs
Educational Attainment, 2007
Population >25 with
Population >25 with
high school diploma
advanced degree
Percent
Percent
93
37
85
27
The Mayo Clinic
ranks 2nd in the US
News & World
Report 2009
America’s Best
Hospitals for 5th
consecutive year
MSP
U.S ave
MSP
U.S. ave
4
. . . and quality of life amenities
#3
#1
Volunteering rate
in the nation
#1
“Local food” community
in the nation
#2
Theatre seats per
capita, behind NYC
#1
“Most Athletic City” in
the nation
#1
Largest mall
in America
Number of museums
4 Major League
sports franchises
And the largest pond hockey tournament in
the world!
5
However, the region is losing ground
Difference between Twin Cities employment
growth and U.S. employment growth1
1.0
Job growth has
significantly
declined
relative to the
U.S.
0.8
0.6
0.4
0.2
0
1992
-0.2
1994
1996
1998
2000
2002
2004
2006
2008
-0.4
-0.6
1 3-year moving average difference between Twin Cities and the U.S. using the given year and the previous two years
6
Our business rankings have worsened
Milken Best-Performing Cities
Forbes Best Places for Business and Careers
2003 rank
2009 rank
2003 rank
2009 rank
Austin
1
8
Raleigh-Durham
12
2
Raleigh-Durham
3
1
Sacramento
15
58
MSP
20
76
Austin
59
4
Columbus
24
38
Denver
89
44
Denver
34
14
MSP
99
123
Sacramento
36
119
Columbus
10
135
Seattle
89
17
Seattle
13
17
Chicago
100
71
Chicago
14
160
7
The Twin Cities have a
challenging business climate
th
38
Minnesota is 38th out of 50 in terms of
overall business climate according to
Milken Institute Cost of Doing Business
Index
rd
43
The tax foundation ranked Minnesota
43rd out of 50 on its business tax climate
rd
373
Twin Cities is 373rd out of 381 MSAs
ranked from lowest to highest labor cost
8
COST OF DOING BUSINESS
High cost of doing business in the Twin Cities is driven
largely by tax, regulatory and labor costs
Initial findings

Tax
environment
Legislative/
regulatory
environment




Labor costs


Minnesota ranks poorly both on business climate (41 of 50)
and ratio of tax benefit to tax burden (46 of 50)
Minnesota’s corporate tax rate of 9.8% is third highest in
the country
Minnesota ranks 30th on Forbes’ “Best states for doing
business” rankings
Minnesota has the most stringent health insurance
mandates in the country
Twin Cities has the 8th highest labor cost (out of 381 cities)
15.9% of workers are in unions, above 12.5% national avg.
Wages for low skilled workers in the Twin Cities are 8.5%
higher than peer regions
SOURCE: McKinsey Global Institute, Forbes, Tax Foundation, Moody’s Economy.com, Firm experts
9
COST OF DOING BUSINESS
Minnesota
Minnesota’s taxes are among the highest
in the country
All other states
MN state rank
(1=lowest,
51=highest)
2009, Percent
9.8
Corporate
Income Tax1
6.875
Sales
Tax
7.9
Personal
Income Tax2
Corporate
Property
Tax Index3
2.21
US Avg.
6.6
48
US Avg.
5.086
44
US Avg.
5.9
39
US Avg.
3.0
17
1 Represents the highest marginal corporate tax rate
2 Represents the highest marginal personal income tax rate
3 This represents the relative ranking of corporate property taxes (0=best possible property tax ranking, 3= US average, 6 = the worst possible ranking).
SOURCE: Tax Foundation
10
The Twin Cities lack a coordinated
business development effort
Site Selection Consultants say . . .
“You probably have lost a
significant amount of
corporate prospects due
to a lack of regional
agency.”
Local Business Leaders say . . .
“Minnesota gets dominated by almost
every other state because we have no
one hit team, one organization, in
economic development. Nothing’s
coordinated, it’s a mess . . .”
We have multiple
organizations focused
on economic
development, but no
coordinated , regional
effort . . .
11
Agenda

Case for Change

What Drives Job Growth?

Strategies for Greater MSP
12
12
Three Sources of Job Growth
Retain existing companies in
the Twin Cities and foster an
environment for growth
Retain
Quality
Job
Growth
Create
Enable the creation of new
Twin Cities firms through a
culture of innovation
Attract
Attract investment and
corporate relocations from
outside Minnesota
13
Process Levers
Environmental Levers
How do you Create Job Growth?
Cost of Doing
Business
level of taxes, incentives , regulatory and/or permitting process
Quality of Life
lifestyle and community factors
Human Capital
quality and investment of workforce, education and training
Infrastructure
regional transportation, airport access, telecom, utility capabilities
Innovation and
Start-up
R&D capabilities, commercializing research and ability to source
capital support to entrepreneurs
Unified Vision
Economic development strategy developed and institutionalized
with main economic development organizations
Central ED
Governance
A single organization coordinates economic development efforts
Sector Focus
Explicitly target particular sectors as growth engines for the region
Marketing
Campaign
Highly visible campaigns which market regional identity
14
Greater MSP Assessment
MSP above peers and
national average
15
MSP around average
MSP below average
Assessment
Environmental Levers
Cost of Doing
Business
Quality of Life
Human Capital
Supporting Facts




Ranked #1 on Sperling’s best places, #2 on Forbes Best U.S.
Cities to earn a living, and #2 in Next Cities: Hotspots for
young, talented workers

36.8% of Twin Cities residents have a bachelor’s degree
relative to 27.5% nationally

MSP average commute time of 24 minutes is at the US
average and average commute time via public transportation
is better than US average
Broadband penetration of 56% is middle of the road relative
to peers
Infrastructure

Innovation
and Start-up
Minnesota’s corporate tax is third highest in the nation at 9.8%
MN ranks 43rd in overall tax climate
MSP ranks 8th highest in wage labor rates out of 383 MSA’s


Ranks 22nd in number of entrepreneurs per thousand
residents
At 26 deals venture deals in 2007, MSP lags top innovation
hubs
15
Greater MSP Assessment
MSP above peers and
national average
16
MSP around average
MSP below average
Assessment
Process Levers
Unified Regional
Vision
Central ED
Governance
Marketing
Campaign
Supporting Facts







Sector focus
Currently various economic development entities
operate with varying visions
ED pursued at a sub-regional level
Currently, ED entities operate largely autonomously
Sub-regions within MSP often compete for business
rather than coordinating efforts
Limited outreach efforts on regional basis, with most
outreach coming from city entities such as Capital
City Partnership
More to Life and Positively Minnesota efforts
Historically limited coordinated cluster efforts but
some current activities underway (e.g., RCM,
Humphrey Institute)
16
Proposed 3 Strategic Priorities for the
Region to collectively work on…
 Address the cost of doing business
 Develop a regional
vision, strategy and
approach for economic development
 Enhance entrepreneurship and innovation
17
Agenda

Case for Change

What Drives Job Growth?

Strategies for Greater MSP
18
Where those findings led us: Itasca Job Growth Initiatives
Objective: Fuel Quality Job Growth
Create new companies
and start-ups
▪ Support and enhance the
productivity of the region’s
entrepreneurship ecosystem
– Establish a Business Bridge
– Institutionalize working
relationships between the
University of Minnesota
and the Private Sector
Retain, expand and
attract existing
companies
▪ Launch a Regional Economic
Development Partnership
(REDP)
– Private - public partnership
– 13 county MSA definition
– Scope of Activities
– Region’s ED vision and
strategy
– Branding and marketing
– Retention and expansion
– Attraction
19
MSP REDP Launch Status
1 Hire a CEO



Engaged national executive
search firm
2 Secure Year 1 Investment

Nearing Year 1 Goal: $2.8M

Public Sector: 6 counties & 14
cities contribute over $900K

Private Sector: $1.5M pledged,
$1.0M outstanding asks
Currently in final stages of
interviews
New CEO in place in Q1
3 Initiate Legal Incorporation

Incorporating as a 501c3

Creating board governance
concepts & documents

Selecting initial board
members
20
4 Draft Rules of Engagement

Engaging economic
development leaders
throughout region

Formalizing operating
protocol between REDP and
other ED organizations
–20
Appendix
21
Active Minneapolis-Saint Paul Regional Economic
Development Efforts
Regional Economic Development Activities*
Transportation/
Land Use
Talent
▪ 4FRONT
▪ Living Cities
▪ TheLineMedia.com
Corridors of
▪
▪
▪
Opportunity
HUD Sustainable
Communities
Integrated
transit/ROI planning
Central Corridors
Funders
Collaborative
Entrepreneurship
/ Innovation
▪ Entrepreneurial
▪
Accelerator
Business Bridge
– Minnesota
Showcase
– Supplier Library
Strategy and
Growth
▪ REDP: Regional
▪
▪
▪
▪
Green
▪ Thinc.GreenMSP
Economic
Development
Partnership
Brookings
Metropolitan
Business Plan
Regional
Competitiveness
Project
Destination 2025
MetroMSP.org
*Funded/Confirmed programs and efforts with individuals actively working to positively impact regional
economic development in the greater Minneapolis Saint Paul metro area
–22
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Where those findings led us: Job Growth Initiatives
Objective: Fuel Quality Job Growth
Create new companies
and start-ups
Key Itasca
Initiatives
▪ Support and enhance the productivity of
▪ Launch a Regional Economic Development
the region’s entrepreneurship ecosystem
Partnership (REDP)
– Establish a Business Bridge
– Private - public partnership
– Institutionalize working relationships
– Scope of Activities
– Region’s ED vision and strategy
– Branding and marketing
– Retention and expansion
– Attraction
between the University of Minnesota
and the Private Sector
Rationale
Retain, expand, and
attract existing companies
▪ Region’s entrepreneurial activity slowing in
recent years
▪ Opportunity to bundle and promote core
assets
▪ Prominent and critical gaps in funding
▪ Other regions are aggressively competing
availability, entrepreneurship culture,
and regulations
for jobs, while Twin Cities frequently not in
consideration set
23
Itasca Project History (2003 – 2009)
Ideas, Innovation, and Business Climate
Talent/Workforce
1 Retaining and Growing Leading
Employers/Grow MN!
4 Creating a World-class K-12 Education
System in MN
2 Strengthening University-Business
Relations
5 Supporting the Strategic Redirection of
Minneapolis Public Schools
3 Supporting the Growth of Small Business /
GetGoMN.org
6 Supporting Early Childhood Development
Infrastructure
Quality of Life
7 Advancing a Comprehensive
Transportation Plan
9 Financially Fit Minnesota
8 Twin Cities Compass
10 Understanding and Addressing Socioeconomic Disparities/Close the Gap
24
Retaining and growing Twin Cities-based
establishments is a significant opportunity
Employment loss
Employment gain
Twin Cities average gross employment flows
Average annual percent change of employment, 2002-2007
Retain
Create
Attract
18%-22%
 Should we focus on
1-3%
1-3%
(3%-6%)
retention of jobs
given that it has the
largest base of
growth?
 Which focus – retain,
(17%-21%)
Loss from
Loss from
1
contraction establishment
closings2
Key questions
Gains from
existing MN
firms3
Gains from
creation of
new firms4
Gains from
attracting new
establishments5
SOURCE: Bureau of Labor Statistics, Dunn & Bradstreet, Economy.com, McKinsey analysis
create, attract –
would provide the
greatest return on
investment?
25
Small employers account for
approximately 76% of job growth
Total employment in Minnesota ,
Employment growth by enterprise size1
Percent, 2003-2006
Small
17
Medium
34
Large
Percent of employment
growth, US
Percent, 2003-2006
Key questions
 Should we develop
76
77
21
49
24
0
Percent of
Employment
Small (1-20 employees)
Medium (21-499 employees)
Large (500+ employees)
strategies specific to
company size?
 Where do we get the
greatest return on
our investment?
2
Percent of
Employment
Growth2
SOURCE: US Census Statistics of US Businesses, McKinsey analysis
26
A small group of sectors has driven the
majority of job creation
Twin Cities Job Creation by Sector
(2002 – 2007)
Percent
Employment
Growth
Difference
MSP-US
-0.3
Food/Drinking Places
11.1
Employment
Growth CAGR
Twin Cities
2.3
Hospitals
11.0
5.0
+3.3
Social Assistance
10.5
6.8
+3.0
Ambulatory Health Care
Educational Services1
Administrative Services
Professional Services
General Merchandise
Stores
10.3
4.0
+0.6
7.8
7.2
6.2
4.0
5.8
1.8
1.4
1.1
+3.7
-0.2
-1.5
-0.3
Other
31.8
Top employment
growth sectors
Key questions
 Should we focus on
growing specific high
skill, high productivity
sectors?
 Should we focus on
improving the
economic foundation –
“a rising tide lifts
all boats” ?
Job Creation
SOURCE: Bureau of Economic Analysis, Bureau of labor statistics, Moody’s economy.com, McKinsey analysis
27
Best practice regions employ varying mixes of levers
but several emerge as consistent across regions
Process levers
Environmental levers
Nashville
Cost of doing
business
Austin
RaleighPittsburgh Durham
Ireland
Key area of focus of economic
development effort
Secondary area of focus of
economic development effort
Not an area of focus of economic
development effort
Singapore
Consistent
lever across
regions

Quality of life
Human capital

Infrastructure
Innovation and
start-up
Unified vision

Central ED
governance

Sector focus
External marketing
campaign

28
QUALITY OF LIFE
The Twin Cities compare well against peers in civic
engagement and leisure amenities
Leisure and entertainment rank,
2007
Score based on multiple metrics1
Chicago
98
MSP
95
Baltimore
95
Denver
94
Seattle
94
San Diego
91
RaleighDurham
86
Sacramento
83
Columbus
82
Austin
63
Volunteerism, 2007
Percent of pop’n volunteering in past year
MSP
38.3
Seattle
35.1
Columbus
34.1
Austin
29.8
Denver
28.8
Raleigh-Durham
28.3
Baltimore
27.1
San Diego
25.9
Sacramento
23.2
Chicago
22.1
Libraries, 2007
Library volumes per capita
Columbus
4.2
Chicago
3.8
Baltimore
3.6
MSP
3.5
Seattle
2.9
Denver
2.6
Austin
2.4
Raleigh-Durham
2.3
San Diego
2.2
Sacramento
1.7
Recreation space, 2007
Acres of park per 1,000 residents
Arts Community, 2007
Arts establishments per 1,000 residents
Austin
San Diego
Raleigh-Durham
Columbus
MSP
Denver
Sacramento
Seattle
Baltimore
Chicago
37.5
35.9
34.2
18.1
16.7
15.3
11.3
10.4
7.7
4.2
Denver
Austin
MSP
Chicago
Seattle
San Diego
Baltimore
Columbus, OH
Sacramento
1 Rank compiles data on dining, shopping, entertainment, outdoor activities, media, performing arts, and museums
SOURCE: Corporation for National & Community Service; Cities Ranked & Rated; Trust for Public Land
0.92
0.74
0.72
0.72
0.62
0.53
0.52
0.48
0.42
29
HUMAN CAPITAL
The Twin Cities have a highly educated population
Population over 25 with high school diploma
Percent, 2007
Advanced Degree Attainment
Percent, 2007
Graduate or Professional
Bachelors
MSP
93
MSP
25
Seattle
91
Seattle
23
Columbus, OH
89
Columbus, OH
Denver
88
Denver
23
Raleigh-Durham
88
Raleigh-Durham
25
Sacramento
87
Sacramento
Austin
86
Austin
Baltimore
86
Baltimore
19
14
33
San Diego
85
San Diego
21
12
33
Chicago
85
Chicago
20
12
32
US Average: 84.5
SOURCE: US Census “American Community Survey,” McKinsey analysis
21
20
12
37
12
35
11
32
13
36
15
10
25
40
30
13
38
US Advanced Degree Average: 27
30
INFRASTRUCTURE
Twin Cities residents have reasonable commute times
relative to peers
Average commute time by car, truck, or van alone
Minutes, 2007
Austin
15
Average commute time by public transport
Minutes, 2007
19
Columbus, OH
24
MSP
24
36
38
Sacramento
25
Raleigh-Durham
25
San Diego
25
Denver
25
43
34
49
45
Seattle
27
46
Chicago
27
47
Baltimore
29
US Average 25
SOURCE: US Census Bureau, American Community Survey
50
US Average 48
31
INNOVATION
The Twin Cities’ VC market is less robust than
its peers
Venture capital investments
Total venture capital deals
Average annual investment, 2004-2007
$ per capita
Total, 2004- 2007
Number of deals
651.5
Denver
541.2
San Diego
447.1
Austin
401.3
Seattle
264.9
Raleigh
235.4
Baltimore
154.1
MSP
Sacramento
75.1
349
San Diego
200
Austin
343
Seattle
Raleigh
114
Baltimore
114
98
MSP
Sacramento
Chicago
23.2
Chicago
Columbus
17.5
Columbus
SOURCE: Capital IQ
247
Denver
32
55
16
32
INNOVATION
Minnesota has competitive levels of entrepreneurial
activity
Entrepreneurial activity1, 2007
Number of entrepreneurs per 100,000 people
Entrepreneurship Growth, 2002-2007
CAGR
State rank
1=highest
California
396
Colorado
338
10
-0.20
17
-2.90
North Carolina
321
19
Maryland
319
20
-2.50
Minnesota
312
22
-2.50
Texas
Illinois
Washington
Ohio
295
241
217
195
26
40
43
47
-3.10
-3.90
-0.20
-0.80
1.30
US Average = 300
1 Using Census Current Population Survey data, the study tracks the change in the number of non-business owners who become business owners month-to-month
SOURCE: Kauffman Foundation Index of Entrepreneurial Activity
33