Moving Your Community from Surviving to Thriving Barry Bluestone Director, The Dukakis Center Northeastern University National League of Cities Leadership Training Institute February 6, 2011 Savannah, GA

Today’s Agenda  Economic Trends  Demographic Trends  State and Local Fiscal Condition  5 Steps to Becoming the “CEO for Economic Development”  Takeaway Action Items

NATIONAL ECONOMIC CONDITIONS

Source: U.S. Office of Management and Budget Economic Recovery

Source: U.S. Office of Management and Budget But even with rapid GDP growth, unemployment remains above 6% through 2014

Stubbornly high unemployment means  Sluggish recovery in state and local revenue  Continued high unemployment insurance costs  Continued high Medicaid costs

DEMOGRAPHIC TRENDS

U.S % Source: U.S. Census Bureau Percentage Growth in Number of Households ( ) 40%+15-35%10-15%5-9%<5%

Projected Population Growth ( )  Arizona +40.4%  Nevada +40.4%  Florida +34.4%  Texas +22.7%  Idaho +22.6%  California +20.5%  N.H %  N.Carolina +20.1%  Washington +19.1%  Delaware +18.0%  Virginia +18.0%  N. Dakota+2.2%  Iowa+4.0%  Nebraska+4.3%  Ohio+4.3%  W. Virginia+4.4%  S. Dakota+4.5%  New York+4.8%  Illinois+5.5%  Oklahoma+5.8%  Indiana+6.4% Source: U.S. Census Bureau

Age 18-54: + 900,000 Age 55+: + 20,800,000 Source: U.S. Census Bureau

Age 18-54: + 4.1% Source: U.S. Census Bureau Age 65+: % Age 55+: %

U.S.: 99% Source: U.S. Census Bureau

Potential Job Gap  Today, we have an unemployment rate of 9.6 percent and nearly 14 million unemployed  But after the recovery and at current labor force participation rates, if we return to a normal economic growth rate, there will likely be more than 15 million new jobs in 2018 but only about 9 million new workers

Public Finance Crisis With only 900,000 additional adults between the ages of 18 and 54  Who will fill the jobs in our cities?  Who will be around to pay the taxes we need to provide services?

Impact on State and Local Government Will the aging of the population  Have a major adverse effect on state and local revenue?  Lead to an increased need for state and local public services?  And the retirement of public employee workforce create a drain on state and local budgets?

FISCAL CONDITION OF STATE BUDGETS

Source: Center on Budget and Policy Priorities, December 2010

Projected State Budget Gaps: FY2012  Illinois50.9%  New Jersey37.4%  Nevada37.1%  South Carolina26.6%  Minnesota24.5%  Texas22.3%  California22.2%  Louisiana22.0%  Connecticut20.8%  North Carolina20.0%  Washington18.5%  Only three states are projected to have no budget gap North Dakota Alaska Arkansas Source: Center on Budget and Policy Priorities, December 2010

GAO State and Local Study  “Because most state and local governments are required to balance their operating budgets, the declining fiscal conditions in our simulations reveal the fiscal pressures the sector faces and foreshadows the extent to which these governments will need to make substantial policy changes and other adjustments to avoid growing fiscal imbalances.” Source: GAO State and Local Governments’ Fiscal Outlook, March 2010

State and Local Operating Balance as % of GDP From , State & Local budgets in Operating Balance From 2010 through 2060, State & Local budgets are increasing out of balance Source: GAO State and Local Governments’ Fiscal Outlook, March 2010

State and Local Government Taxes as % of GDP Between 2010 and 2060, a decline in sales tax revenue; stable property tax revenue; and recovering income tax revenue Source: GAO State and Local Governments’ Fiscal Outlook, March 2010

Federal Grants to State and Local Government as % of GDP Between 2010 and 2060, Medicaid grants roughly constant, but other grants decline sharply Source: GAO State and Local Governments’ Fiscal Outlook, March 2010

Health and Non-Health Expenditures of State and Local Governments as % of GDP Non-health spending will be Forced to drop substantially As health care spending increases sharply Source: GAO State and Local Governments’ Fiscal Outlook, March 2010

The Size of the “Fiscal Gap”  To close the fiscal gap would require a 12.3% reduction in state and local government expenditures each and every year through 2060  Or … a 12.3% increase in state and local revenues each and every year through  Or … a combination of the two

ECONOMIC DEVELOPMENT TO CLOSE THE FISCAL GAP

Closing the Fiscal Gap  From the GAO analysis, it is clear that ways must be found to control health care costs  Providing local services more effectively and efficiently will also help to close the fiscal gap  Regionalizing some local services can also help gain scale economies that help to make the gap manageable

But the Real Answer to Fiscal Health is …  Boosting local economic development  Attracting business investment and jobs  Generating additional tax revenue from new and expanded business for vital public services

How to Boost Economic Development in Your City or Town

5 Steps to becoming the “CEO for Economic Development” 1.Become SWOT aware 2.Capitalize on strengths; mitigate weaknesses 3.Identify appropriate industry sectors 4.Know the language and requirements of businesses 5.Build a business friendly environment

Become SWOT Aware Objectively explore internal strengths and weaknesses  Inventory physical assets, local businesses, and knowledge/skills base  Understand the role of each municipal department in economic development  Engage business leaders, real estate experts, and other stakeholders  Prioritize economic development objectives; build consensus

Become SWOT Aware Objectively explore external opportunities and threats  Know your competition  Know what potential investors think of your city/town  Collaborate regionally  Take advantage of regional and state programs and resources  Know what is important to business in a global economy

Capitalize on Strengths and Understand Weaknesses Build upon Strengths  What do existing businesses need in order to grow?  Use that knowledge to define initial economic development strategies  Build critical mass and/or attract supporting businesses  Highlight strengths/assets of your municipality in marketing  Plan strategically based on strengths—envision 10 projects into the future

Capitalize on Strengths and Understand Weaknesses Mitigate Weaknesses  Address those that are most important to businesses  Include economic development in all municipal policies  Use good communications practices to “rebrand” your community, internally and externally  Don’t try to hide weaknesses; it’s better to take action in correcting them

Indentify Appropriate Industry Sectors  Target industries that make sense for your municipality  Consider physical assets, existing businesses, workforce, geography, and regional efforts  Try to build a critical mass or range of supplemental services  Use direct marketing within an industry

Know the Language and Requirements of Businesses  Speak their language and know the jargon  Appreciate “time to market” and other global economic realities  Learn “Deal Makers/Breakers”: parking, cost of rent, skilled labor force, access to markets, and timely permitting  Rely on “Deal Closers” sparingly: tax incentives

Build a Business Friendly Environment  Streamline municipal services  Create One Stop permitting  Use transparent and efficient permitting processes  Provide check lists and technical guidance  Use overlay zones, improvement districts, or develop pre-permitted sites

Finally … as CEO for Economic Development build a Business Friendly Environment  Coordinate local and regional strategies for long run success  Build support within the community and among stakeholders to convey a consistent message

Takeaway Action Items What immediate steps can you take as the “CEO of Economic Development?” Write down several action items to take home.

Thank you! Barry Bluestone Director, The Dukakis Center Northeastern University