The Rebirth of Older Industrial Regions: New Opportunities for Private Sector Investment Barry Bluestone Northeastern Un

1. The Rebirth of Older Industrial Regions: New Opportunities for Private Sector Investment Barry Bluestone Northeastern University The American Assembly The Tri-State Alliance Rockville, Illinois April 29-30, 2009

2. Fundamental Proposition Regions have the ability to create their destiny, but they can benefit from having sophisticated partners who can help them develop tools and information to compete successfully.

3. Deal Makers Deal Breakers Regional Self-Assessment Regional/County Action

4. Deal Breakers • Regions fail to adequately understand how the global economy is changing • Older Industrial Regions suffer from widespread misperceptions • Individual sites have problems • Local permitting process can help or hinder • Tax breaks are not the primary solution

5. Deal Breaker #1 Due to rapidly changing market conditions in the global economy, municipal leaders in older industrial regions often lack complete, up-to-date information regarding the specific location needs of particular industries and the recruitment efforts of competing locations. As a result, they are not always fully prepared to assist firms in a timely and effective manner, helping to overcome obstacles to local investment. “When I have to send a manager overseas for six weeks, and they drink bottled water and eat peanut butter crackers they bring from home they don’t like it. If I offered to send them to Chelsea, Holyoke, or Lawrence, they’d take it in a minute.” -- IT executive

6. Deal Maker/Action Steps • Create a powerful self-assessment tool for regions to use to better clarify their economic development goals and identify their competitive strengths and weaknesses relative to other locations. Municipal leaders would have the opportunity to work with a team of private sector developers to undertake an internal review of all aspects of the development process using the assessment tool. • Provide ongoing economic development training for municipal leaders and managers that focus on how to respond to opportunities in different sectors.

7. Deal Breaker #2 Business decision makers have well-defined “cognitive maps” – perceptions or expectations—about the attributes of and opportunities in older industrial regions that can adversely affect the way they think about locating in these locations. “We were in Lawrence when it was the arson capital of the U.S. For a while, being there meant that we couldn’t always recruit our first choice for a position. However, we don’t have that trouble any longer. Lawrence is coming back.”

8. Deal Maker/Action Steps • Assist communities in combining resources regionally in order to market and respond to inquiries from firms, developers, and location specialists. • Assist regions in making their websites more attractive, graphically rich, easy to navigate, and more useful to firms, developers, and location specialists. Improved websites would include information on the characteristics of individual available parcels, zoning and regulation, available financial incentives, and background data on demographic and economic characteristics of the locality. Websites could include testimonials from existing business leaders and messages from municipal leaders indicating the support firms receive in their municipalities. • Enlist companies already located in older industrial regions as ambassadors. Businesses offer the best testimony to other businesses on the advantage of particular locations.

9. Deal Breaker #3 Specific site deficiencies can add excessive costs to doing business in older industrial communities. “The mills were built when people walked to work. There is no parking and no room to create it.”

10. Deal Maker/Action Steps • Encourage the enactment of overlay zoning districts where there can be flexible use, expedited permitting, focused public safety efforts, and amenity packages essential to creating competitive advantage in a particular regional setting.

11. Expedited Permitting Specialized Industrial Cluster Focus Transit Connections Overlay District Priority Infrastructure Mixed Use Development High Performing Schools Housing Public Safety Operations Leveraged Public/Private Investment Strategic Workforce Investment

12. Deal Maker/Action Steps • Make changes in the brownfields regulatory program to facilitate re-use of sites to facilitate faster clean up and further limit liability. • Change state rules overseeing municipal property taxation that force new owners to pay delinquent taxes of previous owners.

13. Deal Breaker #4 State and local review processes can add excessive costs to doing business in older industrial communities. “Once a product has passed its Phase III trials, we want to get the new product into production before another company does. Speed is so critical that we start building the production facility before the product is approved. “ – Biotech Executive

14. Deal Maker/Action Steps • Identify market ready sites and have them pre-permitted for industrial and commercial uses. The marketing of pre-permitted local parcels can be done through regional web sites, site finder services, and other commercial site services. • Empower someone in the administration to specifically oversee the development process and respond aggressively and proactively to the needs of firms considering the region as a site for location . • Create a permit system that allows for a single presentation of a development proposal to all boards with jurisdiction in the region and establish a specific time frame for community response in the initial stage of the review process.

15. Deal Breaker #5 Traditional public sector financial tools such as tax abatements, tax credits, and subsidies, while often strategically important as a deal closer, are not sufficient to attract high value business investment if previous deal breakers are not overcome. “From our perspective, time is money. We may actually be able to make a deal work more effectively if we can receive expedited permits and infrastructure enhancements, than by factoring in a tax subsidy into our pro forma.” – Developer

16. Deal Maker/Action Steps • Use the Tax Increment Financing (District Improvement Financing in Massachusetts) program to create revenue streams for critical infrastructure in specific locations. • Site state and municipal facilities in urban locations to stimulate creation of amenities and other attractions to spur private sector commercial and industrial investment.

17. Lead Actors • State Governments • City Governments • Regional Agencies • Business • Universities

18. The Local Economic Development Self-Assessment Process • Survey corporate real estate and development professionals on location decisions: NAIOP (National and Massachusetts Chapter) CoreNet Global • Create Economic Development Self-Assessment Tool (EDSAT) for Municipal Leaders

19. Sample CoreNet NAIOP 107 80 General Industrial 40.0% Commercial / Profess. 38.8% Mixed-use 8.8% R& D Facility 5.0% Retail 5.0% Manufacturing 2.5% Office / Headquarters* 68.5% Manufacturing 10.4% Retail 10.4% Mixed-use 5.7% R&D Facility 2.8% Distribution / Warehouse* 1.9% Project type selected International 38.3% Pacific 32.7% Middle Atlantic 28.0% West South Central 21.4% East North Central 20.5% South Atlantic 19.6% New England 19.6% West North Central 15.8% East South Central 15.8% Mountain 11.2% Pacific 18.9% Middle Atlantic 18.9% South Atlantic 18.9% East North Central 8.8% International 7.6% East South Central 6.3% West North Central 6.3% New England 5.0% West South Central 5.0% Mountain 3.8% Geographic area in which do most of work **

20. NAIOP/COREnet Survey Issues • Permitting Processes • Labor • Development and Operating Costs • Business Environment • Transportation and Access • Quality of Life/Social Environment

21. Which of location factors received the highest scores? • On-site parking • Rental rates • Availability of appropriate labor • Timeliness of approvals and appeals

22. Which of location factors received the lowest scores? • Municipal minimum wage law • Access to rail • Informative municipal website • Strong trade unions

23. Combined SamplesMean Scores for All Factors (1 = Very Important; 4= Unimportant) * Question asked in NAIOP survey only. **Question asked in CoreNet survey only.

24. When asked what they thought was most critical, what did location specialists tell us? • Proximity to major highways, airports, and transportation routes • Rents, land costs, and lease costs • Availability of appropriate labor pool • Permitting, approvals, and appeals processes • Amenities and services nearby • Pro-business/development friendly government

25. The Self-Assessment Tool (EDSAT ) • We developed a new computer-based interactive Self-Assessment Tool for evaluating and interpreting a region’s assets, strengths, and weaknesses in light of the factors that firms and developers consider most important for site selection. • The self-assessment tool includes sections on: • Regional Characteristics • Regional Development Processes

26. What the Tool Does • The tool helps local officials understand: • The true “deal breakers” • How they should prioritize their activities • Data from various communities included in the assessment tool make it possible for individual municipalities or regions to compare themselves to other communities to determine how well they are meeting their own economic development goals. • The act of measurement assists officials in paying greater attention to the critical deal breakers and deal makers, provides a reality check on the types of industries they can attract, and gives added leverage in dealing with the real barriers.

27. The Framework for the Tool • Local officials and staff working together answer 194 questions in 10 categories • The tool is available to take online • The results of the Self-Assessment Tool are secure and provided only to the local officials and those with whom the community chooses to share it • The results provide an ability to compare a community’s economic development assets, strengths, and weaknesses to peer communities

28. Sample Report Page: What the Self-Assessment Tool Gives Back

29. Interpreting the Results • The community’s results are color-coded to provide rapid analysis of how they are doing relative to peer communities • For each Self-Assessment Tool section, the results are interpreted in terms of what development and location specialists consider most important, somewhat important, and less important to attracting investment and jobs

30. Using the Results • Municipalities that have participated in EDSAT report they have used the self-assessment for: • Educating their staffs about the factors most important to attracting investment and jobs to their communities • Creating cross-department Economic Development Teams • Pinpointing bottlenecks in the development process (e.g. cumbersome or slow building inspections and zoning reviews) • Improving municipal websites • Reaching out to developers and local business community to show their interest in encouraging development

31. Conclusion • The EDSAT provides municipal officials and their staffs with up-to-date comparative information about their economic development prospects and ways to improve their economic development efforts • The EDSAT process helps train municipal leaders to become better economic development agents for their communities

32. WWW.CURP.NEU.EDU 617-373-7870

33. Appendix ASelf-Assessment Survey ResultsCity of Springfield, Massachusetts

34. Introduction • In this report you will find: • a summary of Springfield’s responses to the self-assessment questionnaire • a peer analysis that highlights how Springfield’s responses compare to those from the eleven other Massachusetts cities that participated in this phase of the project, and • insights from the development community to help you begin thinking about these issues in a concrete, actionable way. We look forward to reviewing this report with you at your earliest convenience. As promised, all individual results will be kept strictly confidential.

35. Strengths In our analysis of factors that are deemed “ very important” and “important” in our survey of developers and site location specialists, the city of Springfield does very well, relative to its peers in the following areas: • The city does not require off site traffic mitigation for development. The city has access to inter-city Amtrak service but unlike most of the other cities in the study, it has no commuter rail. While some cities have better air service, access to Bradley International Airport is a strong asset. • The city has excellent colleges and universities. These institutions could to be integrated into the city’s overall industrial attraction and retention strategy, the way other cities in the study have done. • The rents for properties in the city are well below average, compared to the other cities. This is a great strength for an overall marketing strategy. Unlike other cities in the study, the city also appears to be protecting these sites from encroachment and re-zoning. Much of the office space appears to be Class B (over 60%), which is high compared to other cities in the study.

36. Strengths Continued In other factors, less important to market actors, Springfield also does very well, compared to other cities in the study. These include: • Springfield has a system for monitoring maintenance of physical attractiveness, which few other cities take into consideration. • The city’s housing prices are less than half of their peer cities. • Unlike other cities, Springfield does seek abatement on tax title properties. • The city’s overall website, when compared to the other cities, has important information necessary for attracting firms. However, there are weaknesses that need to be addressed quickly (contact information for city officials including phone numbers and e-mail, links to the Chamber of Commerce and arts and cultural organizations). It also needs aggressive management to keep it timely, fresh, and up-to-date.

37. Concerns In our analysis of factors that are deemed “very important” and “important” to developers and site location specialists, the city of Springfield does not do as well, relative to its peers, in the following areas: • Parking is limited near development sites and fees for existing parking are significantly higher than averages in other cities. Springfield currently has no strategy to use sites near transit for transit oriented development. • The city has a higher than average percentage of vacant commercial and industrial space. Further, unlike other cities in the study, the city does not maintain an active relationship with commercial and real estate brokers with sites in the city. Also the city does not appear to be taking advantage of state tax incentives for attracting firms the way many of the other cities do.

38. Concerns Continued • While Springfield performs at or above average in most permitting approvals, the length of the appeals process is significantly higher than peer cities. The city does not have a checklist of permitting requirements to give to prospective firms. • The city has a high prevailing wage rate for blue-collar manufacturing workers. Although there is a reputation for being a strong union community, the market actors are no longer as concerned about this issue as in the past. While the city has an adult education program, it is over-subscribed. • The city has higher than average rates of crime for burglary, auto theft, robbery, and homicide. • A lower percentage of Springfield 10th graders tested as proficient or advanced on the 2004 MCAS and the city has a lower than average graduation rate for high school seniors.