Driving Regional Economic Growth: Opportunities for Cook County Presentation to the Economic Development Foundations Working Group August 31, 2011 Robert Weissbourd

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

Economic Development: Markets Empowerment Origins: From “Equity” to … “Equity” Economic Development: Assets Civil Rights 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.

Employment networks Entrepreneurial opportunities Business, real estate investment Expanded products and services Competitive, healthy communities, underutilized assetsUndervalued, underutilized assets PovertyProductivity Connectedness Isolation LIC economic development reconnects poorer people and places to the economic mainstream. Market Failure in Lower Income Communities

The Pieces of Economic Development … Education Infrastructure Business Development Sustainability Housing Workforce Training

Strategic economic development designs and delivers the programs to create a whole greater than the sum of the parts. Succeed or Fail “In Context” of Each Other Education Business Development Sustainability Housing Workforce Training Infrastructure

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

The Goal is Economic Growth Economic Growth Flows from Market Activity  The outputs we care about – 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 sector activity  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 Why Metros? Economic Geography and Place-Based Development Economic growth entails strengthening metro economies, and that requires deliberate, ground-up, tailored activity.

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

Service Exports 75% U.S. Air Cargo Weight 79% Airline Boardings 92% Population 66% Graduate Degrees 75% Venture Capital Funding 94% Patents 78% Wind + Solar Energy Employment 76% Top 100 Metros Share of U.S. Total 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 Gross Product 73%

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)  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?

Economic Geography Institutional Economics New Growth Theory Act Comprehensively – The Whole is Greater than the Sum of the Parts. Develop Institutional Capacity and Intentionality. Customize. Economic Geography Institutional Economics What is it About Place that Affects Economic Performance? New Growth Theory Keys to Influencing Economic Performance

Key Systems (Market processes – housing, labor, etc.; production dynamics – clusters, value chains, etc.; innovation dynamics - knowledge creation, networks, commercialization, etc.) 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.) 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.) Economic Outputs (Businesses – gross regional product, profits; households – wages, other income, etc.) Macro/Global Context & Trends What Drives Inclusive and Sustainable Economic Growth?

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

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

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 Minneapolis-St. Paul Puget Sound Source: Brookings Institution Pilot Metro Business Planning Regions

It’s One Economy Agenda “Metro-Economics” Opportunities for Cook County Key Lessons and Next Steps Discussion Overall Regional Performance By Leverage Point: Definition and Practice Regional Status Exploring Roles for Cook County

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

Losing Momentum Source: Moody’s Analytics; MCIC “Strong Balance Sheet, but Poor Income Statement”

Excelerate Labs iBio CMAP CEDA DCEO Lots of ED Activity; Little Coordination Source: Regional Economy Initiative, Metropolis Strategies and RW Ventures.

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  Diverse economy, with complementary specializations, in both conventional and functional clusters  Many of the biggest clusters are growing more slowly than their national peers  Strengths in logistics, business services, food processing, metal/machinery manuf., health care/life sciences, …  Several groups are pursuing cluster studies, but few comprehensive, business driven cluster strategies are underway.  Diverse economy, with complementary specializations, in both conventional and functional clusters  Many of the biggest clusters are growing more slowly than their national peers  Strengths in logistics, business services, food processing, metal/machinery manuf., health care/life sciences, …  Several groups are pursuing cluster studies, but few comprehensive, business driven cluster strategies are underway. Sources: MCIC; Regional Economy Initiative, Metropolis Strategies and RW Ventures.

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

 Slightly above average in percent of knowledge workers  Attracting talent from around the world (as indicated by flow of high skilled immigrants)  52% of all Illinois jobs are “middle skill,” but in 2008 there was a 9% shortfall in workers with the skills to fill them  Production of human capital is mixed – world class universities, uneven community colleges, many failing elementary and high schools  HC development system fragmented and not sufficiently employer driven  Slightly above average in percent of knowledge workers  Attracting talent from around the world (as indicated by flow of high skilled immigrants)  52% of all Illinois jobs are “middle skill,” but in 2008 there was a 9% shortfall in workers with the skills to fill them  Production of human capital is mixed – world class universities, uneven community colleges, many failing elementary and high schools  HC development system fragmented and not sufficiently employer driven Regional Status: Bifurcated 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, 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

 Average levels of business churn and low numbers of high impact firms  Limited innovation networks, ecosystem, culture (but emerging, particularly in IT/digital)  Average levels of business churn and low numbers of high impact firms  Limited innovation networks, ecosystem, culture (but emerging, particularly in IT/digital) Regional Status: Underperforming, but Improving  World class research universities and R&D centers, but limited commercialization  Uneven capital access for entrepreneurs (e.g. low SBA lending) 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

 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)  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) Increase Spatial Efficiency

 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 Housing Costs as Percent of Income Housing + Transportation Costs as Percent of Income Regional Status: Dense Nodes, but Stuck in Traffic  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 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.  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

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

High Road Development Low-wage Regulation Subsidies 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.

Next Steps Opportunities for the Region (with County “lens”) Roles for the County Market AssessmentInventory assets and opportunities Evaluate Cook government programs and competencies Strategy IdentificationIdentify high potential strategies integrating key market leverage points 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 Presentation to the Economic Development Foundations Working Group August 31, 2011 Robert Weissbourd