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Manufacturing: A False Hope? Not So Fast.
Picture courtesy of John Makely / NBC News
There’s been no shortage of articles that claim U.S. manufacturing is poised for a comeback. But earlier this month, the Washington Post investigated the issue in more detail to ascertain whether there has been too much hype around manufacturing or whether we should truly expect to see the industry rebound.
The good news: there are 520,000 new manufacturing jobs in the U.S. since January 2010.
Yet in digging deeper, the Washington Post uncovered that only 50,000 of these jobs have been a result of companies reshoring their operations in the U.S. What’s more, all of the new manufacturing jobs represent only a fraction of the 6 million manufacturing jobs that were lost from 2000 to 2009. The 500k+ new jobs that have been added to the U.S. economy might simply be a result of the economy, more broadly, improving.
Jan Hatzius, Goldman Sachs’ Chief Economist, puts it bluntly: “Evidence for a structural renaissance is scant so far.”
And while there may be little evidence thus far, there are certainly reasons to think that industrial activity will be coming back to the U.S., at some point, likely in the next 5-10 years. ICIC research and others give a few reasons why:
- The competitive advantages associated with manufacturing abroad are eroding. According to the Boston Consulting Group, productivity adjusted labor costs in the Yangtze River Delta region, China’s industrial heartland, are rising 15-20% annually, making them likely to converge with those in the Sun Belt by about 2015. Others suggest that the gap in labor costs between the U.S. and China, which was $17 per hour in 2006, will be as low as $7 per hour in 2015.
- Similarly, wages for U.S. manufacturing workers are flat. The fact that wages have not been keeping pace with inflation means that it’s become more affordable to employ U.S. manufacturing workers. According to a Wall Street Journal article last spring, “The U.S. has held manufacturing wages in check while there has been strong wage growth in China and moderate wage growth in Mexico.”
- American workers are becoming more productive, and U.S. organized labor has weakened, meaning that fewer workers are unionized, especially in southern states. As a result, it has become more affordable to employ American workers generally.
- The hidden costs associated with manufacturing are rising; managing vendors and operations halfway around the world, along with high turnover, inconsistent quality, and inadequate protection of intellectual property are making it more affordable to manufacture onshore where operations can be monitored more closely. “Companies are realizing it’s not as easy to do things in China as they thought,” says Hal Sirkin a Senior Partner at the Boston Consulting Group.
- The falling value of the dollar has reduced the relative price of U.S. exports, with the dollar to Euro exchange rate falling from $1.20 in 2000 to between $0.75 and $0.80 during the spring of 2012.
- The price of crude oil has increased from $16/barrel in 1999 to over $90/barrel today, making it more cost-effective for many firms to shift production closer to their headquarters and/or customer base.
- Domestically, the bursting of the real estate bubble resulted in more affordable industrial land. Prior to the collapse of the housing market, for instance, industrial prices in Los Angeles increased from one-third to twice those of residential land due to pressure from conversions. Now that residential demand has cooled (though this varies by region), more land – specifically, inexpensive land – is available for industry.
It’s no surprise, then, that car companies like Ford, Nissan, Honda and Toyota are increasingly moving production back to the United States. In 2008, Ikea opened a new factory in Virginia to reduce shipping costs. Airbus just broke ground on a new factory in Alabama. And in January, Lenovo opened a new manufacturing facility in North Carolina to increase delivery speed of computer parts.
So this manufacturing comeback—which is it: rational excitement or hype?
It will probably take a few years for us to really know. As the Washington Post article points out, the groundwork has been laid to make it more attractive for companies to reshore operations here in the U.S. That said, we are not likely to see most low-wage, low-skill manufacturing jobs return in textile for instance; industries like this are simply too reliant on cheap labor and the manufacturing infrastructure is already in place abroad to handle this type of production.
Moreover, “China is a market that’s growing extremely rapidly – so many companies will want to stay in close proximity to those customers,” says MIT professor Suzanne Berger.
But higher-skilled manufacturing jobs are likely to make a comeback, and it’s important for cities to train their local workforce for these jobs when they do arrive. Certainly, we should not ever expect to return to the manufacturing glory days of the 1950s; at our current rate we will not even meet Obama’s goal of 1 million new manufacturing jobs by the end of his second term.
Manufacturing, and the associated industrial activity, is particularly important to inner cities. ICIC research has shown that industrial jobs tend to have relatively low barriers to entry. Unlike many opportunities that are available to less educated workers, these jobs also offer middle income wages – providing a path for inner city residents to achieve economic security. So while the jobs may not be coming back to the urban core as quickly as we may like, we should fully embrace them once they do arrive—and they will.
BY Steven Pedigo on June 17th, 2013
He said, She said: Do Businesses Really Have Trouble Accessing Capital?
Picture courtesy of Howell Marketing
Earlier this week, policymakers and private sector leaders gathered at the Treasury Department for a summit on capital formation. Not surprisingly, business owners, bankers and federal officials had very different opinions on the availability of capital for small businesses—the very same businesses that we have been relying on to jumpstart the nation’s economy.
“I’ll be honest, this is not an area where, when you go out and talk to the world, you hear the same thing,” said Gene Sperling, director of the White House’s National Economic Council.
And sure enough, the banking industry jumped to defend its lending practices. “I think it’s a bit of a myth that banks aren’t lending,” said Beth Mooney, chairperson of Key Bank in Cleveland.
While capital availability may vary depending on the business, its owners and the location, one thing holds true: urban small business owners struggle to obtain the financing needed to grow and scale their companies.
Access to capital has historically been a problem in low-to-moderate income (LMI) areas, illustrated most extremely in so-called “redlining” – the practice of refusing to make loans or writing insurance policies based upon neighborhood and, often, racial characteristics, rather than the merits of would-be borrowers. Despite the illegality of redlining today, capital gaps still exist.
Some policymakers and lenders believe that regulatory efforts, such as certain provisions in the Community Reinvestment Act, have resolved the issue. But as ICIC’s research shows, this is simply not the case. In an annual survey of the country’s fastest-growing inner city businesses, one in five respondents said that access to capital remains their primary obstacle to growth. This indicates that even the most capital-ready businesses in the inner city face access challenges.
Given the lack of institutional financing, inner city business owners often rely heavily on credit cards, owner financing, and friends and family.
During this week’s capital summit, Mooney argued that “Most companies who want credit and are creditworthy are having their capital needs met, to the extent it’s through a bank loan.” She suggested that any decrease in small business lending could be attributed to scarcity in demand.
But after aggregating thorough data, ICIC found that overall demand for loans by inner city businesses appears robust. Nationally, businesses have an average of $671,000 in capital, but this figure is just $525,000 for inner city businesses, a 22% difference. The figures are even starker among minority business enterprises (MBEs): the study found that 74% of MBEs were undercapitalized. Not surprisingly, inner cities have a high concentration of MBEs.
Moreover, ICIC research shows there appears to be a higher proportion of “would-be” borrowers in inner cities (if capital were available), suggesting a high latent demand.
The analyses in ICIC’s research work underscore the importance of information on the distribution of capital across small firms. With improved information, policymakers, lenders and business owners can have a frank conversation about the problem and then collectively search for solutions.
So while Ms. Mooney might be right in that not all businesses are having trouble accessing capital, we know for sure that businesses in the inner city are having trouble obtaining financing. It would seem that increasing both the volume of and the access to capital must be part of the solution if we hope to address slow business growth and job creation in our nation’s most economically distressed urban communities and, by extension, the nation at large.
BY Amanda Maher on June 14th, 2013
ProsperityNOLA Launches in New Orleans
In the wake of Hurricane Katrina, which devastated numerous families and businesses in 2005, there was an opportunity to rebuild New Orleans and make it stronger and better than ever before. It didn’t take long for the city to pull itself up by its bootstraps; businesses across the city committed to staying put and playing a role in the city’s revitalization.
To spur continued growth, the City of New Orleans has just announced ProsperityNOLA, a five-year economic development strategy formulated with resident input and in partnership with the local business community.
The New Orleans Business Alliance (NOLABA) calls the initiative a “living, actionable plan, created through months of data-driven planning, that will foster Mayor Landrieu’s vision for a diverse, sustainable and prosperous economy for all citizens.” Moreover, the plan identifies ways for businesses to stay local, invest locally, and grow locally. From October 2012 until May of this year, NOLABA, with the aid of ICIC, helped convene an advisory board comprising 75 business leaders across a range of industries to meet and outline a strategic focus for the project. The growth strategy started with 13 target industries before that was cut to five and culminated in the creation of ProsperityNOLA.
At the core of ProsperityNOLA is a focus on clusters: geographic concentrations of interconnected companies, specialized suppliers, service providers, and associated institutions in a particular field that are present in a specific geography. As ICIC research indicates, clusters increase the productivity with which constituent companies can compete. The five main clusters targeted by ProsperityNOLA are advanced manufacturing, health sciences, creative digital media, sustainable industries, and transportation and trade.
The cluster-based economic approach builds on work conducted by ICIC last year and popularized by HBS professor and ICIC founder Michael Porter in The Competitive Advantage of Nations. In a project for Seedco Financial-Louisiana, ICIC performed an economic analysis of Southeast Louisiana. Comparing pre- and post-Katrina employment revealed that Southeast Louisiana had lost nearly one-fifth of its employment base after the Hurricane. The region’s two largest clusters, local health and services and local commercial services, lost over 15,000 jobs in the past decade alone. Oil and gas-related jobs were down 46% in the wake of industry consolidation.
But despite these losses, ICIC found that other clusters had experienced double-digit gains, such as tourism. Emerging clusters such as creative digital media were also offsetting job losses. This momentum presented New Orleans with a unique opportunity to diversify and strengthen its economic base while addressing key challenges, such as the region’s persistently high poverty rate, by working towards more equitable growth that includes residents of low-income areas. And that’s just what ProsperityNOLA seeks to do.
Last year’s final report to Seedco Financial-Louisiana, a CDFI focused on supporting underserved small businesses and disadvantaged populations, offered recommendations as to how it could strategically lend and bridge gaps that hinder the region’s growth and cluster development. Namely, ICIC suggested that the CDFI take a targeted approach and lend to businesses in the high-performing clusters, specifically those that are inclusive (such as experiential tourism and heavy construction services) and attainable (such as advanced manufacturing and creative digital media).
By developing new products and targeting investments in a way that helps address cluster-specific gaps, lenders and investors can more effectively support the economic development priorities, including job and wealth creation, outlined in the 5-year ProsperityNOLA plan. At the same time, these lenders and investors can maximize their returns by identifying new investment opportunities and financing growing companies. In doing so, the residents and businesses of NOLA can all prosper together.
BY Amanda Maher on June 12th, 2013
Tech in the City: the Intersection of Government and Entrepreneurs
Photo courtesy of CNN Tech
Tens of thousands of students are sticking around Philadelphia each year upon graduation—a problem most cities would crave to have. But this has resulted in a growing demand for city services, despite shallow city coffers.
With this trend in mind, the City of Philadelphia has reached out to local tech entrepreneurs to see if they can collaborate to procure services for less.
The idea sprouted after the Google Fiber competition, where Google was pitching to cities the concept of installing high-speed fiber-optic broadband throughout an entire city. As Philadelphia was putting together its application, the enthusiasm from the tech and innovation crowd in the city was overwhelming. It highlighted the power of convening these groups.
The City of Philadelphia responded by creating “Open Access Philly” (OAP). The idea was to continue to convene those at the intersection of tech, entrepreneurship and civic participation. The purpose was to create the free flow of information (open data) to foster participatory urbanism, allow for digital inclusion and support the regional tech and startup ecosystem.
Initially OAP began by collecting datasets. There were a few strategies they adhered to: First, more isn’t really necessarily more–they needed to focus on the quality of the datasets, not just quantity, before releasing. Second, vetting the data was key—they didn’t want to get into a protracted process whereby the city had to ensure that the dataset releases were accurate. Third, they must realize that the city’s data isn’t the only data. And finally, the city only has so many resources; they needed the help of others.
Open Access Philly was formally launched in time for the Philly Tech Week in April 2011.
The success of this platform spawned the Open Data Race. This was a contest to uncover Philadelphia-related datasets that were not yet available to the public. What data do people what? What are the resources nonprofits and civic organizations need in order to better serve their constituents? Perhaps surprisingly, the top three vote-getters were information about students, bike theft and open land. The OAP team provided the nominators of these ideas with assistance to collect and make that data available.
Having achieved so much success with open data in the past few years, the City of Philadelphia decided to take it to the next level. They conceived of an idea to link tech entrepreneurs and startup companies to government procurement opportunities.
Specifically, “BIG Ideas PHL” engages the tech community to help solve the city’s IT problems. For projects below $30,000, the city isn’t required to do a full RFP process; they must only get three quotes. BIG Ideals PHL deliberately puts out these solicitations to a broader audience to receive more applications for these contract opportunities. It’s a win-win: the more applications the city receives, the more likely the cost for the project will be lower; for startup companies and tech entrepreneurs, they now have access to additional procurement opportunities.
The innovation is fostered through the city’s Office of New Urban Mechanics (NUM). Modeled after a similar department in Boston, NUM acts as a civic innovation lab, or an in-house R&D shop. In many ways, NUM acts as an innovators’ portal. Friedman described it as “identifying the nails and then identifying the hammers to help hammer the nails down.” In other words, NUM connects innovators to problems that residents are trying to solve.
Too often, government rules and regulations constrain the souring of talent and suppliers. NUM provides entrepreneurs with a safe place to innovate on city projects. Prototypes coming out of NUM tend to be small-duration, hyper-local projects that have a high risk for failure but could also provide important learnings for the city.
Bloomberg Philanthropies saw the promise in bringing the civic and tech communities together: earlier this year, they awarded the City of Philadelphia as one of the finalists for the Mayors Challenge. As such, the city received $1 million for the “Philly Social Enterprise Project” (PSEP). The vision for PSEP is simple: package civic challenges as opportunities for entrepreneurs to solve. PSEP seeks to move from an ad-hoc to a more deliberate system of procurement with tech entrepreneurs. Through better connecting public and private sectors, they will avoid leaving external problem-solving resources on the table. Otherwise, valuable intellectual capital and talent will be wasted.
For cities interested in replicating similar systems, Friedman offers a few lessons:
- Seek out a coalition of the willing: Start with a few people or departments; you do not need to bring all parties together at once. The coalition will grow as you move forward. Start small.
- People want to partner: The projects that these entrepreneurs are taking on are low-dollar, small-scale prototypes; nobody is asking for $10 million. Projects cost more like $25,000.
- People want to solve problems: Generally, if you frame an issue as a problem to be solved, it gives people something on which to latch on and focus.
- Don’t worry about credit: It takes a village to advance any of this work; make sure to give credit to the grandstand of people who have been actively supporting the movement; it’s better for everyone.
Friedman also credits Mayor Nutter for his willingness to push these projects forward. Not every mayor would encourage such risk taking - but after all, the greater the risk, the greater the reward. Engaging the young tech community is certainly paying off for the City of Philadelphia.
BY Amanda Maher on June 11th, 2013
Happy Babies, Happy Families
This year’s number 1 company on the 2013 Inner City 100 List, Happy Family, out of New York City, grew at a phenomenal 205% compound annual growth rate over the last 5 years. In practical terms, that means that the firm tripled its revenues on average every year between 2007 and 2011. One of the goals of the Inner City 100 program is to shine a deserved spotlight on the fastest growing inner city companies in America- by extension, it further allows the world an opportunity to see the unique facets of these outlier’s successes. By any social or, as their growth above suggests, business measure, Happy Family has been a successful business. Here are some distinctive facets of their story that other companies might benefit from knowing about.
Emphasizing the “Why” Simon Sinek, in this widely viewed TED talk on marketing and the “golden circle”, had the memorable insight that “people don’t buy what you do, they buy why you do it.” Happy Family, as a double-bottom line company, truly seems to embed this insight into every aspect of its business operations. When asked why she started her business, CEO Shazi Visram goes through a litany of health statistics and problem solving before even bringing up a market opportunity or profits: “Happy Family was borne out of the health problems in the U.S. 1 in 3 babies will get Type 2 diabetes before the age of 12 and taste buds get trained from a very young age. My dream was not just to create a company for profit but also to build a model for giving back.” With a network of organic family farmers worldwide to help source the raw materials for their products, joint product development with nutritionists and pediatricians, and an emphasis on sustainability in packaging and production, this company not only creates its products, it lives their ideals.
Mommy Marketing and the Product Ecosystem Happy Family, launched in Mother’s Day in 2006, is now in over 17,000 stores and 30 countries worldwide. How did they get as ubiquitous as Tupperware? In fact, the comparison is apt; just as Tupperware parties leveraged women across the country to directly sell and familiarize their communities with the containers, Happy Family boasts the modern day equivalent. Input from and interaction with “mommy bloggers” and the recruitment of over 25 “Happy Momma” brand ambassadors coordinating states across the country have no doubt played vital roles in the company’s growth. And just as Nike famously created the market for their products by bringing professionalism to athletic shoes, Happy Family publishes targeted nutrition guides and pieces on its blog that have encouraged the ecosystem for their products. Time-tested marketing strategies and product sincerity aside, this company started like many others: with a lot of hard work and a bit of luck.
Mentorship and Entrepreneurship "Shazi is a competitor who has a tremendous passion and a refusal to give up." – Honest Tea CEO Seth Goldman, an investor in and director of Happy Family. How did Happy Family go from a frozen, organic alternative to baby food in a jar to a line of organic food products for the whole family spanning continents? It started with American Express’s (AMEX's) Shine a Light Competition in 2010 in which the banking giant looked to find the most inspiring business in the country. Facing long odds, Visram won the contest outright, culminating in an AMEX Gold Card advertisement during the 2011 Super Bowl. Next, she recruited an all-star team of advisers including Honest Tea’s Seth Goldman, Top Chef’s Tom Colicchio, and actress Demi Moore. Close readers might remember that our number 2 company on the Inner City 100 for the last 2 years was Revolution Foods, another fast-growing healthy food company; crucially, these two companies are united by the budding organic foods mentoring pipeline that has developed in the US. These companies are sprouting up with a vision and then getting advice from CEOs that have already been there to grease the wheels of their ascents and avoid common stumbling blocks. For all intents and purposes, Happy Family and Revolution foods may just be the tip of the iceberg.
For all these reasons, we feel that Happy Family is a story that other urban businesses can learn from and hopefully replicate. To read more about Happy Family, check out their website or this Inner City 100 feature in Fortune.
BY Sathya Vijayakumar on June 10th, 2013
Deploying Capital Through Catalytic Investments: The Working Cities Challenge
Photo Credit: Boston Federal Reserve: 20 Working Cities Challenge Metros
Massachusetts Gateway Cities: Start your engines—the race for funding has begun! Last month, policymakers and urban enthusiasts descended upon the Federal Reserve Bank of Boston for the launch of the Working Cities Challenge, a promising effort to support leaders who are reaching across sectors to ensure that smaller cities in Massachusetts are places of opportunity and prosperity for all their residents.
Today, applicants and their teams will reconvene at the Boston Fed for an all-day workshop to really hone in on the “systems change” aspect of the competition. Teams will analyze the systematic barriers to change in their cities and identify what actions are necessary to achieve systems change. Leaders from the private sector, including the CEOs of Partners HealthCare and CityFresh Foods, will provide insight to applicants on the most effective way to engage the private sector in these collaborative efforts.
This Working Cities Challenge, supported by Living Cities, the Massachusetts Executive Office of Housing and Economic Development (EOHED), and the Massachusetts Competitive Partnership (MCP), pits 20 Massachusetts cities against one another for the chance to receive up to $700,000. Applicants from smaller cities (population between 50,000 and 250,000) are pitching their ideas for how to best improve the lives of low-income residents in their urban core. The eligible cities were selected because they each have a median income below the national average, and poverty rate that exceeds the national average.
The Working Cities Challenge (WCC) is modeled after the Living Cities Integration Initiative. It seeks to bring leaders from the public, private and nonprofit sectors together to create bold, transformative change in the lives of low-income people. The cross-sectoral approach aims to utilize private markets to work on behalf of low-income residents. The proposals must move beyond programs and projects, and instead focus on transforming systems in order to create long-lasting change.
At the launch event, Ben Hecht, President of Living Cities, explained, “We need more public-private cooperation, collaboration and investment aimed at removing the barriers that are holding back our smaller and medium-sized cities.”
Put bluntly: the public and civic leaders need to stop prescribing solutions; they must listen to what the private sector needs in order to flourish.
So what are applicants trying to achieve? Here’s a look at a few of the proposals:
- Everett aims to set up a “cultural office” to leverage the strengths of the many organizations that work with newcomer populations. The city seeks to provide an information hub that will bring immigrants more squarely into the city’s civic, economic and cultural life.
- Fitchburg’s “eCAREnomic Development” program aims to create a report card to measure the impact of traditional economic development activities on local residents, as well as tracking other indicators of community health and the local economy, in order to drive change.
- Lowell’s team wants to support additional immigrant and 2nd generation-owned small businesses, especially in its emerging food cluster.
- Malden hopes to tackle its foreclosure problem by combating vacancy, buying occupied buildings facing foreclosure, and providing affordable homeownership and rental opportunities.
- New Bedford plans to use the major Cape Wind energy effort to connect and transform their approach to workforce training and economic development.
Some cities, like Holyoke, submitted multiple Letters of Interest. The Holyoke Public Library has proposed creating a Holyoke Adult Learning Network initiative to better serve ESL residents through workforce training courses at the library. In another proposal, the Holyoke Food and Fitness Policy Council wants to create a “From Paper City to Food City” initiative aimed at creating a healthier city. And finally, the Holyoke Innovation District hopes to link lower-income residents with opportunity that emerge as a result of the city’s new High Performance Computing Center. Ultimately, the Boston Fed has told the cities with multiple proposals that they must work together to submit only one final application. If more than one application is submitted per city, the applications will all be disqualified.
Full applications are due at the end of July. At this point in time, the review committee will set up interviews with applicants and conduct site visits when necessary. The final awards will be given in January 2014.
The Working Cities Challenge is exciting for many reasons. First, it acknowledges the assets that already exist in many of these smaller, working-class cities. “Loss of a manufacturing base does not mean loss of assets, and we want to support these cities as they move toward greater economic prosperity,” echoes Eric Rosengren, President of the Federal Reserve Bank of Boston.
Second, the implementation awards (ranging from $150 to $700k) are not so large that successful initiatives cannot be replicated in other cities. Indeed, most American cities look more like these cities than larger cities like New York, Chicago or Detroit. Other cities have the same issues; we need to find a way to share this information. The hope is that other regional Federal Reserve Banks will support a like competition in their areas. It was encouraging to see a representative from the Atlanta Fed on hand at the Working Cities Challenge launch on Friday—it shows that the Fed is serious about sharing learnings.
And finally, the Working Cities Challenge provides a fertile breeding ground for collaboration even among the cities that are not selected as winners. Mere participation in the challenge is going to foster greater cross-sector collaboration at the local level. Prabal Chakrabarti of the Federal Reserve Bank of Boston urged Friday’s attendees not to waste this opportunity to reach out to local hospitals, universities and the broader business community to really listen to their concerns and perspectives.
Here at ICIC, we know first-hand the impact that these collaborations can have on inner city neighborhoods. For instance, ICIC research indicates that anchor institutions now provide more jobs in inner cities than any other sector. Anchors are the top employers in 66 of the top 100 inner cities. If local officials can craft better relationships with these anchors, low-income residents will reap massive economic benefit.
It is only though the inclusion of the private sector that long-lasting change will sweep through inner cities. We are excited to see the Boston Fed take the lead in supporting such potentially catalytic investments.
BY Amanda Maher on June 7th, 2013
How to Find the Customers Who Appreciate You
The following piece is by Drew Greenblatt, past Inner City 100 Winner and CEO of Marlin Steel Wire Products
For its first 40 years, Marlin Steel Wire Products made exactly what its name implied--steel wire baskets. A few years after I bought the company in 1999, we made a major transition from building steel wire baskets used primarily by bagel bakeries to making steel wire baskets for much more specialized, high-tech clients in fields like aerospace, automotive and pharmaceuticals.
That proved much more fruitful, but we kept exploring. We always canvass our customers for feedback and a few years ago noticed that some seemed frustrated because they sometimes had to wait for a second vendor to produce the sheet metal portion of our wire containers. Often, we were just as frustrated ourselves. We’d move like lightning to produce a basket order but then have to wait weeks for someone else to do the sheet-metal finishing touch. All that hurry-up-and-wait was painful.
I’m a big believer in feeding the niches that appreciate you. We pour resources into our strengths and take them from our weaknesses. Discern a pattern where you’re successful and focus on that. Concentrate on how you can be more appealing to those promising niches. Make massive investments in a certain area. Be No. 1 in that zone.
Two years ago we decided we’d had enough. We invested $2 million in machines to laser-slice, punch and fabricate sheet metal. We also bought out own Haas milling machine so we could do our own tooling to speed jobs and wouldn’t have to wait for someone else to make tooling for us. The investment paid off, proving a major contributor to our rapid growth.
That lesson was driven home to me at an inspiring seminar I attended recently in Boston. The event was put on by the Initiative for a Competitive Inner City, founded by a Harvard business professor, to celebrate 100 of the fastest-growing, urban small businesses across America. These companies had averaged fourfold growth over five years--during a punishing recession no less--by identifying and addressing unsatisfied niches in the marketplace.
Their stories were breathtaking:
To read the rest of the article at Inc.com, click here.
BY Steven Pedigo on June 6th, 2013
Are Pharmacies the Next Urban One-Stop Shopping Centers?
Photo Credit: Jennifer Pottheiser/Mike LeBrecht
Boston’s Downtown Crossing, once a vibrant retail and office destination, experienced a tumultuous period after many big-name shops, including Filene’s Basement and Barnes and Noble, went out of business during the economic downturn. But businesses are coming back—bigger and better than ever.
At the forefront is Walgreens. Walgreens? A pharmacy leading the way? Yes, Walgreens.
Recently, Walgreens opened a new 24,000 square foot location in the Boston Five Cents Savings Bank Building—otherwise known as the former home of Border’s bookstore. This flagship store isn’t just massive. It is serving as a one-stop shopping destination for area residents and mid-week shoppers.
While picking up their toiletries and medications, people can now swing by the juice bar to enjoy a fresh made-to-order smoothie. Those hoping to get a quick manicure or trim before going out at night can stop into the nail and hair salons at the new Walgreens. Hungry? The prepared foods section is huge, and includes a hand-rolled sushi bar.
Traditional grocery products can be found here, too. There is a produce section, fully equipped with organic goods, as well as frozen foods and dairy products. Especially for your convenience, the store stocks beer and wine, too.
The new 24-hour store has created a sleek, open space with a European feel. The period details of the historic building, including the travertine walls and decorative plaster ceilings, remain intact. “We respected the fact that this is a modern building attached to a very architecturally sound part of the building which is very old,” explained Michael DeFazio, Walgreens’ senior director of store concepts. Already spanning multiple floors, including the basement and a mezzanine, Walgreens is now eyeing about 16,500 feet on an upper level.
To promote the behemoth, the company parked a mobile food truck outside for the few days leading up to the opening, offering passersby an opportunity to sample the fresh foods to be served inside upon opening. “I don’t think I’ve ever seen so much excitement over the opening of a drugstore,” says Rosemarie Sansone, president of the Downtown Boston Business Improvement District.
Walgreens, an Illinois-headquartered company, has similar flagship stores in Chicago and New York City.
The company has said it won’t squash local business; indeed, the pharmacy plans to stock local brands. About 20-30 local vendors are represented in each of their other two flagship stores.
Already, we’ve heard of traditional grocery stores trying to fill neighborhood voids by serving as community anchors. For instance, Brown’s Super Stores in Philadelphia offer access to the local credit union, provide on-site financial literacy programs, and are exploring community cooking classes to teach urban residents the importance of nutrition.
Do pharmacies hold the same potential? How might the Walgreens in Downtown Crossing be able to revive a district that, after work, clears out? Will this provide detrimental competition to other local businesses? Share your thoughts!
BY Mary Duggan on June 4th, 2013
For the 2013 Inner City 100 Winners, Workforce Matters
ICIC recently honored the 100 fastest-growing inner city businesses in the nation. While these companies are incredibly diverse, there is one thing they have in common that stands out: these firms are routinely investing in their workforce.
In a recent interview Gary Hobbs, the CEO of BWI, LLC, explained that he intentionally hires local residents for positions at his development and construction firm. BWI works in conjunction with Indianapolis community organizations to create linkages with underserved workers and employment opportunities in his firm. Indeed, Hobbs has even made it a point to engage the local high school. BWI visits the local high schools to generate interest in the firms for adolescents—serving as an entry point for many otherwise unskilled workers.
Opportunities such as these are critical for inner city residents. ICIC research shows that historically, certain industries, such as construction, have “served as gateways for individual of modest backgrounds to gain traction in the broader economy.” Well-paying jobs in these industries provide pathways out of poverty, all the more important for inner city residents: despite comprising only 0.1% of U.S. land area, inner cities are home to 31% of the nation’s minority poverty.
The hiring of local residents has fared well for BWI. In addition to recruiting underserved residents, BWI provides continuing education to its employees to ensure team members’ growth. As a result, BWI has very low employee turnover and high customer retention because the contractors foster strong, ongoing relationships with their clients.
APB & Associates is another Inner City 100 winner that is committed to workforce development. This Cleveland-based IT consulting company is owned by minorities and veterans—two traditionally hard to hire demographics—making their investment in workforce training no surprise. The owners subscribe to a low-income employment program for their administrative functions in order to help local residents gain entry into the industry. APB uses a two-step interview process that includes a skills assessment quiz, which helps to identify where prospective employees will need additional training. Now, all APB team members have a college degree, many of which were paid for by APB.
Christopher Zazo, CEO of Aspenmark Roofing & Solar, has found that hiring locally keeps employees committed to the firm. Employees particularly enjoy the short commute. In fact, Zazo prefers to hire residents from the community, even if they have no background in the industry. Aspenmark finds people with strong work ethic and seemingly strong business integrity, and then will train them for the technical aspects of the job.
At Xtra 21 Express Trucking, a Dallas-based flatbed transportation company, a full 95% of the truckers reside locally. CEO Braylon Lester tells ICIC that the company makes a concerted effort to work with the Texas Workforce Commission to find talent, as well as pull from the local unemployment pool. Lester notes that a strong local economy ensures strong local businesses. Ultimately, a family man himself, Lester finds that hiring locally allows drivers—who are often on the road—to spend more time with their families.
Although many Inner City 100 winners are already investing in their workforce, others acknowledge wanting to do more. Computech Corporation, an IT company in Detroit, is interested in setting up a program to identify local residents who have been unemployed for an extended period of time, and then retrain them for careers in the IT field. CEO Chase Cheesewood explained to ICIC that with the implementation of an ambitious call center project on the horizon, there’s an opportunity for Computech to re-employ large swaths of Detroit locals who have been swept aside in the aftermath of Detroit’s economic downturn. Re-employed residents often turn out to be among the company’s best: they’re grateful for a new opportunity, they’re willing to work hard, and they’re committed to the firm. All they needed were the chances to showcase their latent talents.
ICIC research indicates that Inner City 100 winners hire, on average 40% of their workforce from within the inner city; while 69% offer professional development opportunities and bonus plans for their workers. The 2013 Inner City 100 winners are no exception – 48% of their workers are inner city residents.
We’re seeing it once again: the 2013 Inner City 100 winners are proving that they won’t just settle for the inner city; they’re settling in the inner city and utilizing many inner city assets, including access to a diverse local workforce.
BY Sathya Vijayakumar on June 4th, 2013
Filling the Vacancies: Cities Make a Push for Green Jobs
As the economy chugs along and employers begin to hire again, there is a marked increase in the number of “green jobs” in cities. There are 83,000 green job listings available on SimplyHired.com, a job aggregating website, compared to just 45,000 at this time last year.
What explains this proliferation of green jobs? According to Sara Sutton Fells, CEO of FlexJobs, there are two reasons for the increase: “One, because emphasis on environmental responsibility is growing. Startups, nonprofit organizations and small businesses are cropping up every day with environmentally-focused missions, products and services.” And two, our understanding of green jobs is evolving and encompassing more jobs; traditional companies have been pressured into becoming greener.
Let’s be clear: defining a green job isn’t easy. To some, a “green job” is one associated with employment at “green” companies—or those businesses that are focused on developing alternative energy sources or creating products with low environmental impact. To others, a “green job” can be more traditional employment, such as an HVAC professional, wherein the person is engaged in “greening” activities, such as the installation of solar panels.
ICIC’s working definition of a green job is as follows: Green jobs are those that result in one or more of the following benefits—greater use of clean energy; energy savings; greater resource efficiency; less pollution; or the restoration of natural systems that support life. These benefits may result from a green product or service. They may also result from the improvements in the production process for “conventional” goods and services.
If you’re still confused, you’re not alone. (If I telecommute, is my job “green”?)
As tricky as it is to define a green job, it’s even harder to count green jobs. Companies like SimplyHired likely aggregate the number of listings that contain certain keywords, like “sustainable,” “clean energy” or “environment.” But this method must be used with caution; my own job listing contained the word “sustainable,” but it would be a tough sell to convince folks I work in a green job.
- San Francisco (4,758)
- Houston (3,830)
- New York City (3,221)
- Washington, D.C. (3,207)
- Los Angeles (2,179)
- Chicago (2,165)
- Boston (2,130)
- Philadelphia (1,838)
- Denver (1,343)
- Dallas (1,261)
Some of these cities, like San Francisco and Houston, are not surprising. Silicon Valley is flush with companies exploring green technology, developing energy efficient products and creating systems for things like cleaner water. Meanwhile, Houston and other Texas cities have become hubs for energy development, particularly along the lines of solar.
What are not represented on the list are the smaller, post-industrial cities that are looking to the green economy as a tool for revitalization. Flint, Michigan is one of those cities.
Flint – once devastated by the decline of the U.S. auto industry – is one city hedging its rebound on clean energy. The “Flint Clean Economy Project” strives to use clean technology as a strategy for creating good jobs, fighting poverty and revitalizing Flint’s manufacturing sector. In order to do so, Flint is engaging in active supply chain construction and promoting cluster growth by encouraging linkages between stakeholders across the country.
Encouraging green job growth in struggling cities could be a boon for inner cities. ICIC research indicates that overall, green jobs are growing faster in inner cities compared to other industries. Within inner cities, green jobs experienced growth in the range of 6% to 12% from 1997 to 2008. In contrast, inner city job growth was only 1.3% during this time period for all industries combined.
As the U.S. shifts to a greener, cleaner economy, there will be many opportunities for lower-income residents to access these jobs. City leaders should work with state and federal agencies to identify the ways to support small, green businesses. Often businesses in emerging industries do not have the time or capacity to keep abreast of available funding sources. Assistance would help businesses to flourish.
And when the businesses begin to flourish, the hiring will follow. Cities should engage their local workforce providers to ensure that skills necessary for participating in the green economy are taught, especially to our most disadvantaged workers, who stand to gain the most from these green job vacancies.
BY Amanda Maher on May 29th, 2013
Urban Heroes Helping Cities Thrive From The Inside Out
Last week, ICIC and FORTUNE revealed the list of the 100-fastest growing inner city businesses in the nation. Sure, these companies are diverse. They range anywhere from businesses producing healthy baby food products, to distribution and logistics companies. Construction and technology companies made the list. And increasingly, green energy companies are moving onto the list.
But as diverse as these firms are, they also have one very important thing in common: they’re helping to drive the growth of urban economies nationwide.
While the U.S. searches for opportunities to help the economy regain the strength it had prior to the 2007-08 economic downturn, often overlooked are the inner city businesses putting local residents back to work.
At the Inner City 100 Symposium last week, employees of winning companies shared their stories about what “#ONEJOB” means to them. As it turns out, one job means opportunity. One job means a stable family. One job can uplift a community. One job can transform a city.
“This job means everything to me. I was able to purchase my first home. I started filing. Now I’m leading the digital department,” says Gabriela Martin Del Campo of El Clasificado, a Los Angeles-based Inner City 100 winner. During the recent housing collapse, when numerous residents were being foreclosed upon and neighborhoods were falling into disarray, people like Gabriela moved in and helped to stabilize the community. This is the power of one job.
Too often, inner city businesses are looked upon as mom-and-pop shops, with few employees and therefore little need for support. But the Inner City 100 list reveals the opposite: many successful inner city businesses are actually large employers. Seville Staffing is illustrative of this: the Chicago-based firm has 750 full time employees, 565 of whom live in the inner city. They also employ 400 part-time staffers, of which 250 are inner city residents. In Akron, Ohio, a city devastated by the economic downturn, Inner City 100 winner MobilityWorks employs 350 people and expects to increase its workforce even further in 2014.
Even as hundreds of thousands of jobs were slashed in recent years, inner city businesses are creating jobs, one at a time, to revitalize our urban economies and help to lift inner city residents out of poverty.
“We always say: ‘You can’t get a great job, you can only make a great job.’ You can get a pretty cool job at a great company, but if you want a great job, you have to make that,” says Dan Caffee, founder of Inner City 100 winning company Neutron Interactive.
And while these companies continue chugging away, creating one job at a time, it is essential for policymakers to identify what these businesses need to continue to develop and grow.
It is through these businesses, through the leveraging of market opportunities, that we will be able to create social and economic opportunities for the people who live in some of the most economically distressed parts of our cities.
We heard it last week at the 15th Annual Inner City 100 Awards, and we’ve heard it in the past: if you’re looking to help grow urban economies, support your inner city businesses. Employing nearly 3x more inner city residents than businesses located elsewhere, inner city businesses help cities to thrive from the inside out.
BY Amanda Maher on May 28th, 2013
Urban Heroes Reveal Their Identities
ICIC and FORTUNE are proud to announce the 2013 Inner City 100 - the 100 fastest growing inner city companies in the United States. The Inner City 100 list was published in FORTUNE today and the rankings were unveiled live yesterday at the Inner City 100 Awards ceremony in Boston.
Over 500 corporate, small business and civic leaders gathered to celebrate these urban heroes, amid an upbeat urban marketplace replete with items and services made, offered, or located in the inner city. Attendees were treated to a multimedia experience, with many live tweeting #IC100 and posting instagram photos #IC100 to screens located throughout the room. The excitement was palpable as some of America’s fastest growing urban heroes exchanged ideas and tips on how to be successful.
Of course, these CEOs had much to talk about. Before the awards dinner, over 300 of them participated in two days of intensive management education content. The educational sessions were led by Harvard Business School (HBS) professors, as well as by fellow CEOs. In commemoration of the fifteenth anniversary of the Inner City 100, peer-to-peer learning was heavily emphasized.
The speaker pool was large and diverse due to the vast network of alumni CEOs who attended the event. Featured alumni included Jeff Silver, CEO of Coyote Logistics, whose company is not only one of the fastest growing urban businesses, but one of the fastest growing businesses anywhere. Two speakers made special appearances: Tom Szaky, CEO of TerraCycle, energized the crowd with his Keynote Address about his company’s innovative approach to waste and recycling; and Hamdi Ulukaya, CEO of Chobani, graciously participated in Professor Joshua Margolis’ case study of his wildly successful yogurt company.
A theme that ICIC highlighted at this year’s event was “one job” (#onejob). After premiering a video on the value of #onejob, ICIC Founder and HBS Professor Michael E. Porter asked the crowd to tweet what one job meant to them. Many opinions demonstrated how one job can transform an individual or family while offering a path to more vibrant urban communities. The video also voiced how small business owners truly are urban heroes because they are creating jobs, transforming one family, and one community at a time.
Learn more about these urban heroes by reading the Inner City 100 FORTUNE coverage.
BY Sathya Vijayakumar on May 22nd, 2013
Recognizing 15 Years of Urban Heroes
Each year, ICIC celebrates the nation’s fastest-growing urban firms at the Inner City 100 Awards Gala. While these companies have all been selected for their extraordinary year-over-year growth, they also are honored for their steadfast commitment to inner cities. As we head into the 15th year of Inner City 100, we continue to celebrate the impact that these business have on their communities and local residents. Here are a few of their stories.
While most CEOs would contend that they began their companies as a result of a unique skill or overwhelming passion, that’s not entirely the case with Los Angeles-based Giroux Glass. The wildly successful glass repair company sprung up in what seemed like a case of fate. Back in 1991, real estate investor Anne-Merelie Murrell found herself in the glass business incidentally. She had been buying and renovating buildings in the USC-area of Los Angeles for years, one project at a time. She eyed an industrial property, but the owner refused to sell unless the purchaser was willing to take on the resident glass company and its 10 employees.
“I wasn’t particularly anxious to do that but I did it,” says Murrell. “I was interested in buying properties and changing the face of these few buildings, not getting into the glass business.”
But sometimes, fate works in our favor. Despite a rocky start and inconsistent profits, the glass business began to soar. In addition to the 1992 riots that devastated the neighborhood, the earthquake of 1994 created a demand for both repairs and new construction. By 2008, Giroux Glass had over 400 employees and $37 million in annual revenues. In recent years, the company added satellite offices in Las Vegas, Fresno and San Bernadino.
“As a real estate investor, Anne-Merelie Murrell wanted to make a difference in her neighborhood one property at a time. As an entrepreneur, her impact has multiplied a hundredfold,” says former ICIC President David Latimore. Half of all Giroux Glass employees are inner city residents; these jobs pay well and include health insurance and other benefits. Murrell has even drafted a succession plan that transfers ownership of the company to the employees. She is cultivating a leadership team among her current workforce in order to capably manage the company once she retires.
CEO Angela O’Byrne bought Perez, an architecture, landscape and interior design firm from her employers back in 2004. She knew that in buying the business, she would become her own boss, play by her own rules, and control her own destiny. What O’Byrne could not have expected, however, was the devastation that Hurricane Katrina would wreak on her New Orleans community, just a year after she took the reins of Perez.
After Hurricane Katrina, many companies began to flee the region. This distressed O’Byrne—she resolved to stay in the heart of the French Quarter and make a statement to other businesses: New Orleans will withstand this tragedy; New Orleans will rebuild. O’Byrne immediately jumped into relief efforts, doing hundreds of thousands of dollars of pro-bono work. She spent countless hours lobbying Congressional representatives to ensure that the lion’s share of post-Katrina construction went to local firms who hired local workers. Perez was on the brink of closing three separate times as a result of Katrina, but because of their commitment to the community—the community responded in kind. Perez was offered several forms of local assistance to keep the company afloat during their most trying times.
With Katrina in the rear-view mirror, where does O’Byrne see the company going now? “I see Perez, in the next 5 to 10 years, continuing to give back to the community, continuing to share with its employees and growing to 1,000 people and $100 million in net revenue. That’s a huge vision for fast growth, but I think we can achieve it,” she proclaims.
There is no shortage of Inner City 100 winners making strides on our home front. But often overlooked is the impact that these businesses are having in inner cities globally.
Back in 1994, Detroit-based FutureNet Group founder and CEO Perry Mehta noticed that in India, even CEOs of large companies didn’t have access to computers. He knew it would take an innovative idea to increase computer sales abroad at a large scale; at the time, there were several companies entering this market. Mehta utilizes 8(a) and HUBZone certifications by the U.S. Small Business Administration to give his Detroit-based business a competitive advantage.
After achieving marked success, Mehta decided that supplying CEOs with computers was not enough; there was a desperate need to help foreign children access technology, too. FutureNet began providing computer education to disadvantaged children in Southeast Asia. By 2008, the company was serving around 20,000 very low-income children each day.
The altruism for his native India is matched by his work in other nations: when Haiti was devastated by an earthquake in 2010, FutureNet took a lead in repairing Haiti’s infrastructure. The firm is now investing in technology to help the world cope with water scarcity; it hopes to create a product that de-sanitizes water at one-tenth the price of competitors—all while prioritizing manufacturing jobs in Detroit.
“Our commitment to Detroit has never wavered,” said Mehta. “We purchased a warehouse in the inner city, which is our base of operations, and hire locally as much as we possibly can. We strategically manage the relationship between the company’s economic success and that of the city by providing jobs and opportunities for the people who live in this community. Our success is their success, and vice versa.”
Without a doubt, these are just three of the many Inner City 100 companies that have produced meaningful change in their communities over the past fifteen years. There are countless others.
Join ICIC and Inner City 100 alumni at the 2013 Inner City 100 Symposium and Awards Gala to celebrate the many ways inner city CEOs are acting as urban heroes.
BY Mary Duggan on May 14th, 2013
Want to Boost the Economy? Improve Graduation Rates
There’s nothing novel about levels of education being correlated to future income potential. It’s a longstanding fact that the more education one receives, the more he or she is likely to earn over their lifetime.
But what people may not realize is the impact that high school graduation rates have on the local economy. As it turns out, high school dropouts are costing the economy $1.8 billion in lost tax revenue each year.
A new report finds that increasing graduation rates to 90% could plug state and federal budget gaps simply because of increased tax revenues collected from the graduates. In Colorado, for example, the state had to cut $4.7 million from its higher education budget between 2012 and 2012. If 90% of Colorado’s high school students graduated, the state would have collected an additional $4.1 million in revenue. Instead, the state only graduated 74% of its students in 2011.
In New Jersey, the state recently cut $19.2 million from its public assistance budget. If the state could boost its high school graduation rate from 83% to 90%, it would result in an additional $19 million for state coffers.
The report—written by Civic Enterprises, America’s Promise Alliance and Johns Hopkins University’s School of Education—finds that cumulatively, a 90% graduation rate would boost wages by $5.3 billion. Together, local, state and federal agencies would collect $1.8 billion in additional tax revenue. In all, the report concludes that a 90% graduation rate would lead to $6.6 billion in economic growth each year.
Dropout prevention efforts require upfront investment, but ultimately pay dividends. By some estimates, there is a return of $1.45 to $3.55 for every dollar of investment. If we use these numbers, it means that each new high school graduate provides a net benefit to taxpayers of $127,000 over the course of his or her lifetime. Even if the annual 1.3 million dropouts were reduced by half, this would produce nearly $1 trillion in economic benefit after just 11 years.
Combine new tax receipts with the savings from fewer public subsidies—such as welfare and healthcare costs—and the impact on the economy is massive.
While low high school graduation rates plague the entire country, there is a pronounced racial gap. Nationwide, only 7 of 10 ninth graders will go on to receive their high school diplomas. More than 80% of white and Asian students finish high school, a stark contrast from the 55% of blacks and Hispanics. Given the high concentration of minorities in inner cities, inner cities are particularly affected by the dropout crisis.
Cities in general do a poor job at graduating their students. Almost 50% of students in the nation’s 50 largest school districts fail to get a high school diploma, according to a CBS News report. At one point in time, the U.S. was the world leader in high school graduation rates; we’ve slipped to 18th.
With federal dollars dwindling, cities and states should look for ways to boost local high school graduation rates. It’s clear that, in addition to being a moral imperative (every child deserve a high-quality education), there’s an economic case for increasing the number of our students who complete high school. Ultimately, it is not just high school graduates that will reap the rewards—indeed, all taxpayers will.
BY Amanda Maher on May 9th, 2013
Innovative Product? Check. Foolproof Marketing Plan? Call in the Expert.
Photo: Harvard Business School Professor Rohit Deshpandé
Even great products encounter marketing difficulties. This is the lesson of “Tiger-Tread,” a case study by Harvard Business School Professors Rohit Deshpandé and Richard N. Cardozo, which will be presented at this year’s Inner City 100 Symposium by Dr. Deshpandé.
With over 15 years experience in executive marketing education, Dr. Deshpandé knows a thing or two about marketing solutions. “Tiger-Tread,” is loosely based on a product, produced by the Dow Chemical Company, known as “Liquid Tire Chain.”
Liquid Tire Chain is a substance that creates a gummy texture when sprayed onto the tires of an automobile. The newly formed traction layer helps stuck vehicles maneuver out of snow and ice. Dr. Deshpandé will take Symposium participants through some of the challenges that Liquid Tire executives dealt with as they brought this product to market with an eye on the relationship between finance and marketing.
Marketing is an important component of any business plan, but it can be especially impactful in an urban marketplace. Urban consumers have many choices when they shop and are sensitive to factors like price, value, ease of use, and compatibility with their distinctive city lifestyles. Having a well thought out marketing strategy can expand the reach of a product and tailor it to particular customer groups. For example, one trend analysis found that urban consumers tend to be more daring, more experienced, more likely to try new products and services, and more appreciative of campaigns that target their cities specifically.
Dr. Deshpandé happens to be an expert in product tailoring, introducing the concept of “customer-centricity” at an American Marketing Association meeting in 1998. His primary research interest is customer-centric corporate culture and, towards the goal of enriching the body of knowledge on this topic, he continuously profiles successful, customer-centric companies from around the world. Given the distinctive nature of urban consumers, we are confident that his insights will be invaluable to our consumers.
Interested in hearing what Professor Rohit Deshpandé has to say about Tiger-Tread, targeted marketing, and customer-centricity? Attend the Inner City 100 Symposium, an intensive day and a half of executive education for fast-growing urban firms. View the full Symposium agenda or register here.
BY Guest Blogger on May 6th, 2013
Shifting Gears: Linking Federal Procurement and Transit to Create Local Jobs
Photo by Flickr user prayitno
Amid all the efforts to create well-paying local jobs, there is a missed opportunity in transportation. As cities and states build out or rehab their transit networks, the jobs associated with the bus and train fleet manufacturing are going abroad. There’s currently no mechanism in place to ensure that these jobs, paid for using taxpayer dollars, stay here at home.
The Los Angeles Alliance for a New Economy (LAANE) and the USC Program for Environment & Regional Equity (PERE) are on a mission to change just that.
Using Los Angeles as a test city, the organizations crafted the “Transportation and Jobs for America Project.” Nearly $26 billion is slated to be invested in Los Angeles’s mass transit system over the next several years, and LAANE realized this is a huge opportunity to create jobs for local residents—particularly lower-income, inner city residents.
In a recent webinar hosted by Living Cities, LAANE outlined the three primary goals of their project:
- Reshape government procurement to ensure that public dollars are spent to create American factories, well-paying jobs in disadvantaged communities, and to make procurement more transparent, efficient and effective;
- Support a responsible business sector to bring clean energy transit equipment to the U.S.; and
- Build a community program to organize for the creation of good jobs, factories in low-income communities, and access to those jobs by disadvantaged local residents.
Simply, LAANE and PERE are trying to combine sustainability with job creation; the tool for doing so is government procurement.
Currently, any transit project that uses even a dollar of federal funds must adhere to federal procurement regulations. Given the scale of most transit projects, nearly all include federal funding. Even if local and state agencies want to include local hiring provisions as part of the procurement process, stringent federal guidelines prevent them from doing so. For instance, Miami tried to insist that all new rail cars being produced for their system be built locally. In doing so, the city almost lost all of their federal funding for the project. They were strong-armed into redoing their procurement processes in order for the project to move forward. The opportunity for local job creation was lost.
Federal procurement policies restrict an agency’s ability to incorporate local job strategies, or broader economic development strategies, as part of the procurement process. Cities and states also cannot give any geographic preference to bidders.
Those in the transit sphere are likely familiar with the “Buy America” law. This states that whenever federal funds are used for a transit project, 60% of bus and train equipment must be made in the U.S.
So, you may wonder—doesn’t the Buy America law suffice?
As it turns out, in practice, the high value manufacturing and production continues to leak overseas. Bidders are allowed to self-value vehicle component parts and systems, thereby allowing bidders to undervalue foreign made parts/overvalue local parts. The Buy America law really provides no mechanism for incentivizing well-paying jobs, disadvantaged workers, or workforce training.
LAANE and PERE have drafted the “U.S. Employment Plan” (USEP), which would incentivize domestic economic development. This would provide three different price adjustments for the bidders:
- Employment created as a result of manufacturing rail or bus locally;
- Employment of disadvantaged workers, defined as either: a) those making less than 50% of the regional median income; or b) are either a disabled worker, receive SNAP/TNF benefits, are a veteran and/or a person who resides in an area of concentrated poverty; and
- Investment in new facilities required to service the contract.
During the procurement process, bidders outline what actions they plan to take that will require price adjustments, such as hiring disadvantaged workers. The price adjustments will act as incentives for activities the local government seeks to encourage, such as building new facilities locally rather than manufacturing abroad. Market conditions make these activities more expensive, hence the price adjustment. At no point in time is a company required to create a USEP Workbook, but rather they must do so in order to receive the advantages of price adjustment. LAANE’s in-depth market research found that this voluntary approach was much more amenable to business owners—and stands a better chance of gaining approval by the federal Department of Transportation.
The USEP has recently gained approval to launch trials for three new projects in Chicago, Maryland and for Amtrak’s expansion in New York. Full legal approval of this model is expected by September 2013.
Maintaining research and evaluating these projects will be critical. In order to gain support by businesses and federal agencies alike, the USEP must continue to be grounded in vigorous research. Tracking the number of new, onshore manufacturing jobs and the number of disadvantaged employees who access these jobs will be vital in the model’s success.
If the USEP model is successful, it provides a massive opportunity to create jobs in low-income communities. There are currently 721 proposed new fixed guideway transit projects in 109 regions across the U.S. Of these projects, 497 have cost estimates totaling $250 billion. This new procurement strategy has the ability to give legs to the U.S. manufacturing movement that so many have articulated is moving forward—but who so few have been able provide concrete examples.
BY Amanda Maher on May 2nd, 2013
Goldman Sachs 10,000 Small Businesses Grad Turns Fastest-Growing Urban Business
Photo: Vladmir Naranjo accepts the #8 spot on the 2012 Inner City 100 list
Access to capital. Procurement and contracting. Recruiting and maintaining talent. Understanding the local permitting processes. Finding affordable real estate. Building a business is often like navigating an obstacle course. Learning the tips and tricks to overcome these barriers to growth can really make or break a small urban business.
Houston-based PMG Project Management Group has experienced these challenges firsthand—and has come out on top.
When a friend told co-founder Vladamir Naranjo about the Goldman Sachs 10,000 Small Businesses program, it piqued his interest. The program provides urban business owners with management education, capital and business support services. But by his friend’s account, the program seemed too good to be true. So Naranjo took the time to research and investigate the program. As it turns out, the program was not only very credible, but PMG was eligible to participate.
During the program, Naranjo refined his business model. As many CEOs know, a passion for the work often engulfs the executives in the day-to-day activities. Just because someone has a particularly strong skill, it does not mean that the business owner will know how to successfully run a business. That said, with a little help, these business owners can go on to have wildly successful careers. Naranjo left the 10,000 Small Businesses program with the ability to better delegate so he can focus on implementing the company’s new growth strategy.
Importantly, 10,000 Small Businesses helped Naranjo identify what he personally wanted to accomplish with the business. Despite the company flourishing, he really had no goals or strategies in mind for the future. “If you don’t have a goal, how can you get there?” asked Naranjo.
The program also taught Naranjo about finance, marketing and talent attracted. The structure of 10,000 Small Businesses allows for CEOs to really learn from one another; companies understand one another’s challenges and offer unique solutions for overcoming obstacles.
Any business that contracts with government entities knows that the payment process can be slow. PMG, whose clients tend to fall in this category, learned strategies for accessing alternative forms of capital. After participating in 10,000 Small Businesses, he was able to negotiate differently with the bank, and as a result secured a new loan and was able to finally increase the company’s line of credit.
It’s no wonder, then, that business at PMG has catapulted.
Last year, PMG placed 8th on the nation’s list of 100 fastest-growing inner city firms. Along with this recognition came the opportunity to participate in the Inner City 100 Symposium, which features business management education and case studies at Harvard Business School.
In a recent interview with Naranjo, he explained that the Symposium taught him not just how to find new business relationships—but how to identify the right partners for his businesses. He and co-founder, Ben Mendez, still draw on lessons from this course every day.
But the real highlight for Naranjo and Mendez was coming to Boston to network and learn from other Inner City 100 winners.
Naranjo still actively participates in the alumni networks for both programs—10,000 Small Businesses and Inner City 100. There are monthly alumni meetings in Houston that Naranjo makes a point to always attend. Having gone through the same programs, the alumni businesses have valuable advice and lessons to teach one another. In a way, it also holds PMG accountable for its growth plan developed during the 10,000 Small Businesses program. While most companies’ growth plans get shelved on the bookcase, the monthly alumni meetings provide an opportunity to check in with other CEOs and make sure that their own company isn’t falling behind.
These programs have been so beneficial to PMG that Naranjo has committed to helping other businesses enroll. He had always been a member of the National Association of Minority Contractors—but after these programs, he realized the need to play a larger role. He became a board member of the association and now actively promotes 10,000 Small Businesses to no end. Naranjo knows there are many more Houston businesses would thrive in the program; and in doing so, can go on to be as rapidly-growing and successful as PMG.
“Listen, open your minds, work hard to develop your business’s growth plan, and the possibilities are endless,” Naranjo advises other urban CEOs. And participating in these programs can help businesses do just that.
Join PMG and other fast-growing businesses at the 2013 Inner City 100 Symposium. Learn more and register here.
BY Amanda Maher on April 30th, 2013
Want to create local jobs? Look in your own backyard
Many economic indicators suggest that the economy is rebounding—slowly but surely. But to the 11.7 million Americans still out of work, the jobs aren’t coming quickly enough. After mass layoffs and improved efficiencies, companies just aren’t hiring the way they did in the past.
There has been an overreliance on new entrepreneurs, or the creation of new businesses, to help pull the economy out of the deep recession. But, as former U.S. Small Business Administrator Karen Mills pointed out in a recent article, our best chance at creating new jobs is through the businesses right here in our backyards. Existing businesses hold the key to future job growth: they created 8.7 million private sector jobs from March 2011 to March 2012 alone.
Mills explains that there are millions of companies across the nation that “are ready to scale their operations, plug into supply chains, export overseas and add to their workforce. All they need are the right tools, the right opportunities and the right resources to make it happen.”
ICIC couldn’t agree more.
Since 1994, ICIC has studied the unique economies of over 100 U.S. inner cities. We have analyzed how industries interact in these challenging environments, and the strategies that the most successful inner city companies use to maximize their opportunities and overcome obstacles. Through extensive research, ICIC has learned what urban companies need to succeed, including:
- Access to capital: Capital is a hurdle even for elite inner city entrepreneurs. Inner city companies are nearly five times more likely than others to finance growth through personal assets, friends and family. “Improved access to capital would enable [already successful urban businesses] to create even more jobs and have an even bigger impact on their communities,” says John Mahoney, vice-chairman and CFO of Staples, Inc.
- Links to corporate procurement contracts: Only 25% of inner city companies target decision-makers in the three largest procurement opportunities: corporate, university and medical centers. ICIC has created a guide that outlines five proven strategies for winning these contracts.
- Leverage of anchor institutions: Anchors—large educational, medical or cultural organizations that are deeply rooted in their local geographies and economies—provide a huge opportunity for local businesses. The 7,000 U.S. colleges and universities in the U.S. collectively spend over $200 billion on goods and services annually; hospitals collectively spend $320 billion annually. Approximately one quarter of this spending is done by organizations located in inner cities. ICIC research informs how urban businesses can utilize anchors to grow their revenues significantly.
Countless inner city businesses prove that these strategies work.
Luc Brami, the owner of Washington, D.C. custom sign maker Gelberg Signs, was rapidly increasing sales but needed more capital to finance raw materials, fabrication and to pay his staff upfront. “I can’t qualify for cash discounts of for prompt-pay discounts. It’s preventing me from growing the company at the pace I could because it’s stopping me from going after other business,” he once said. Then, Brami learned about the SBA’s 7(a) loan program that helped him secure nearly $1.5 million in capital to continue to grow his company.
Bronx-based Borax Paper took advantage of a supplier opportunity with Columbia University. After learning that Columbia was making a concerted effort to procure locally, VP of Business Development, Jeffrey Konowitz, researched the purchasing program and found an opportunity to supply the University with biodegradable foodservice products. After a small initial contract was awarded in 2006, Columbia has increased its business with Borax every year and is now one of their largest customers.
These opportunities, combined with continued entrepreneur education, will ensure that existing businesses continue to be our nation’s largest job creators. As Mills points out, the federal administration is not taking this lightly: the President’s FY 2014 budget sets aside $40 million toward entrepreneur education, including an intensive small business leadership program designed specifically to meet the need of growing our existing businesses.
America’s small business community is the backbone of our nation’s economy—the feds understand it, and ICIC has spent years learning the intricacies of it.
At the 2013 Inner City 100 Symposium, held May 20-21st in Boston, ICIC will continue its mission to help grow urban business. Click here to learn more or to register. Your business, too, can be among those helping to grow local economies and put Americans back to work.
BY Mary Duggan on April 26th, 2013
Detroit Future City: An Integrated Approach to Economic Development
Three years ago, Detroit’s public, private and philanthropic stakeholders embarked on a journey to rethink Detroit’s future. An extensive public planning process engaged over 30,000 local residents, hundreds of civic leaders, and technical experts who, together, helped to craft a long-term vision for the city’s equitable growth and development. The result is Detroit Future City.
The Detroit Future City (DFC) Strategic Framework is unlike your typical economic development plan. Rather than a “vision plan” which tends to be illustrative, or a “master plan” that is legally-mandated, DFC’s strategic framework uses a hybrid approach. DFC is a comprehensive, action-oriented blueprint that assigns responsibility for implementation. Ultimately, DFC seeks to raise quality of life for Detroiters, residents and businesses alike.
DFC has five key elements of change: economic growth, land use, city systems, neighborhoods, and land/building assets. In last week’s What Works Webinar, ICIC Research Practice Manager, DFC consultant, and Detroit native Kyle Polk dove into the economic growth element.
What the researchers did
Researchers began by conducting an economic analysis of the local assets, including cluster strengths, occupational, educational and infrastructure assets. The location and existence of anchor institutions—including universities, medical institutions and corporate headquarters—were analyzed.
Researchers paid special attention to the industrial assets in Detroit. An industrial land inventory looked at industrial sites (current land use, historic land use, vacancy, underutilization and market activity), industrial buildings (building type, vacancy, condition and floor area) and industrial firms (employment, and NAICS industry code). Armed with this data, they were able to look at expansion opportunities and proximity to assets like rail and highways. Significant data was collected at the zip code level in order for the team to target key geographic areas.
From here, the DFC researchers layered datasets. Industry cluster maps were layered with the information collected about employment density, land use trends, developable land and building inventory. This hybrid dataset had never been created before. In doing so, the team was able to identify the highest and best use for land in Detroit’s employment districts. Because more than 60% of Detroit residents currently travel outside of the city for work, DFC hopes the analysis will highlight opportunities to bring jobs to the local residents who need them.
What the researchers found
Of the land surveyed, 60% was used for industrial uses, but 22% of that land was vacant. There are advantages of urban land that make industrial land competitive, such as infrastructure—highways in Detroit are concentrated around the industrial corridors and this is vital for transportation, logistics and distribution. There are six arterial streets in Detroit’s industrial corridors that compliment highway access. Of the six Class-1 rails in the nation, four are in Detroit.
The southwest region of Detroit is particularly well-positioned for industrial growth: 91% of industrial sites are within a 10-minute drive of a freeway on-ramp. A half of a billion dollars worth of goods travel through this area each day.
By 2025, Detroit-area intermodal freight traffic is expected to increase by 244% in the actual city of Detroit. This expansion will have massive cluster implications on southwest Detroit’s warehousing and light manufacturing facilities.
To assess the growth implications, DFC researchers looked at the current productivity of private market facilities. Many buildings and sites are simply underutilized. These sites employ too few employees for their size and location. Incentives are needed to consolidate firms who aren’t using their space efficiently; this would allow for the land to be put to more productive use.
Jobs are also coming back to the Detroit region, but unless the city is proactive, Detroit will only attract 2.5% of new regional jobs by 2040. Of the more 300,000+ jobs expected to come to southeast Michigan, this translates into only 7,250 for the City of Detroit.
After analyzing workforce trends, it became apparent that Detroit needs to do more to retain its talent. Currently, skilled workers and school-aged children are leaving the city in waves. Of those who leave Detroit, one in four leaves the state altogether. New immigrants and young entrepreneurs are moving to the city, but only at half the rate of the national average.
What it all means
The city has a real opportunity to grow a variety of economic clusters. As ICIC research has shown, industrial creates well-paying jobs and have modest educational requirements—a strong match for inner city residents. In Detroit, industrial workers earn an average of $50,200 each year, and 50% of these jobs are held by residents with less than a high school degree. Compared to other land uses, industrial also has the highest value for job production. The City of Detroit now must ensure that the industrial land is protected, preserved and used as efficiently as possible.
Moreover, the DFC research team suggests the city invest in targeted employment districts. There should be designated zones where resources are committed to helping minority- and women-owned businesses flourish. A priority permitting process would help businesses in these districts grow. Support for low-cost, shared office space (akin to Tech Town, and others) will also be useful in attracting entrepreneurs to the city.
Meanwhile, the city should embrace coordinated workforce development strategies with existing organizations like the Detroit Regional Workforce Fund and Detroit Job Alliance. By upskilling current residents, it will prepare them for the wave of jobs expected to reach southeast Michigan in the coming years.
This thorough approach, through the use of layered datasets, helps Detroit Future City’s economic growth plan stand out from plans of the past. But a plan can only go so far—it will be up to the city, its businesses and residents to come together to ensure the plan is executed in a way that promotes sustainable and equitable economic growth for Detroit.
Click here to view the entire What Works Webinar presentation.
For questions or comments, contact Kyle Polk at firstname.lastname@example.org
BY Guest Blogger on April 25th, 2013
The High Cost of Underutilized City Parking
America’s infatuation with the automobile has led to sprawling cities, air pollution and zoning codes that mandate a certain number of parking spaces be built for residential units. These residential parking requirements – ranging from two parking spaces per unit to one parking space per bedroom – stem from the fear that streets will become congested and street parking will be overwhelmed if plentiful off-street parking is not provided.
In addition to other negative effects, this has resulted in spiraling development costs whereby an affordable housing unit now costs upwards of $350,000. Per space, surface parking costs around $3,000 and where land is unavailable, underground parking costs at least $25,000. Ultimately, parking requirements act regressively because lower-income households are the least likely to own multiple cars but still must pay, in higher home prices or rents, for their unused parking.
A reduction in arbitrarily determined parking requirements would lead to higher equity, lower development costs, and more productive land uses.
Currently, parking requirements are sucking the potential out of affordable housing developments. A lesser requirement would allow a developer to build more units. In San Francisco, nonprofit affordable housing developers say that the requirements have added 20% to each unit’s costs while decreasing the number of buildable units onsite by 20%. Recently, San Francisco revised its policy to allow for only 0.25 parking spaces to be built per affordable housing unit. Developers then “de-couple” the spaces, giving the residents the option to rent a parking space if necessary.
In San Francisco’s Rich Sorro Commons, less parking allowed the developer to utilize the extra space for retail stores and a daycare facility—which proved especially beneficial for the low-income residents living there. Over $130,000 is generated annually from the retail stores, which is then reinvested into the mixed-use development to make low-income units even more affordable.
Massachusetts cities are also finding creative ways to limit parking requirements. In downtown Northampton, developers are allowed to pay “fees-in-lieu” of building residential parking. The one-time $2,000 fee for each forfeited space is used by the city to build public parking and renovate existing parking. Other cities may opt to invest the fees in improving public transit, sidewalks, and bike paths so that non-motorized travel becomes more attractive to residents.
For a society increasingly concerned with sustainability, urban parking requirements are counterproductive. The more parking we build in cities, the more it encourages people to drive. The more people drive, the less likely cities will be able to reduce parking minimums. It is a cycle that prevents us from building transit-oriented and walkable communities. Instead, cities sprawl and air pollution increases.
Rather than promoting sprawl, we should be encouraging density. Each time residential density doubles, auto ownership falls by 32-40%. With looser parking requirements, any excess land could be used for more economically productive uses, such as more housing, office buildings or retail. Certainly, these uses generate more revenue for the city than parking spaces. Land that was traditionally reserved for parking could be converted into parks, gardens, recreational facilities, or other green spaces, again with an emphasis on building sustainable, healthy cities.
As baby boomers age, we should expect more people to be moving back to the cities. Regional growth certainly provides many opportunities, but also many challenges. Housing prices strong-market cities like Boston, New York, and San Francisco remain high and low-income residents spend a disproportionately high percentage of their income on housing. Urban planners should reconsider our zoning of the past now if we are to showcase cities as affordable, equitable, and vibrant places to live in the future.
BY Amanda Maher on April 22nd, 2013
Turning Trash to Cash: TerraCycle’s Rise to the Top
Tom Szaky, founder and CEO of Terracycle
You’ve heard it before—one man’s trash is another man’s treasure. A 2011 Inner City 100 winner Trenton-based TerraCycle takes the meaning to a whole new level.
It began with worms. Co-founder Tom Skazy was on Fall Break from school. While he was up in Montreal, he watched friends feed table scraps to worms inside a composting bin. His friends then used the fertilizer for their indoor plants. It seemed ingenious; there’s an abundance of food waste—he just needed to get a critical mass of worms to start producing the fertilizer. Before long, the eco-fertilizer was stocked on the shelves of some major retailers, including Home Depot and Wal-Mart.
After finding success by recycling materials for fertilizer, TerraCycle diversified into reuse of other materials. A unique opportunity emerged: Sponsored Waste! Different “Brigades” are sponsored; Bottle Bridges by Honest Tea, Yogurt Brigades by Stonyfield Farm, Energy Bar Wrapper Brigades by CLIF BAR, and so forth. Sponsored Waste now works with several consumer packaged goods manufacturers to turn their non-recyclable packaging into new products.
The success keeps coming. Other brands have partnered with TerraCycle, including Nabisco, Kraft Foods, and Target. The company takes things like used plastic bags to make durable, reusable tote bags.
A book deal (Revolution in a Bottle: How TerraCycle is Redefining Green Business) and TV show (Garbage Moguls) later, TerraCycle is one of the fastest-growing inner city companies in the nation. Sales increased from just $75,000 in 2004 to $3.3 million in 2007. By 2011, the company had more than 100 employees, 30 new waste collection programs, and had donated over $3 million to charities that year alone. By 2012, TerraCycle had helped to divert 2.5 billion pieces of waste from landfills.
But the company didn’t reach this level of success accidentally. After launching the company in Princeton, New Jersey, Skazy needed to find close, inexpensive manufacturing facilities. Trenton – an inner city where nearly 25% of residents live below the poverty line – was perfect…for many reasons.
This year, Skazy will help ICIC celebrate the 15th Anniversary of the Inner City 100. A featured keynote speaker, he will share the story of the company’s rapid rise. He will highlight some of the reasons why, despite growth and increased revenue, he has chosen to keep TerraCycle’s home in Trenton, New Jersey. And he will share with audience members how TerraCycle, like so many other Inner City 100 winners, is having an impact on its local community.
BY Steven Pedigo on April 18th, 2013
To Conquer the Growing Wealth Gap in Suburbs, Begin with Cities
Two prominent articles were published recently highlighting the growing wealth gap in suburban communities. Suburbs, once the traditional haven for middle-class families, are experiencing a wealth divide akin to cities—where inner city residents have fared worse than their wealthier urban counterparts.
In the first article, “Suburban Disequilibrium,” published in the New York Times, the authors describe the vast wealth in the Los Angeles suburb of Bradbury. Just a few miles ease is Azusa, a Los Angeles suburb that is mostly working class Latino families. “These towns represent extremes of social inequality, but in Los Angeles and other areas, they reflect a defining pattern of contemporary suburban life,” the authors write. “Nationwide, rich and poor neighborhoods like these house a growing proportion of Americans, up 31 percent compared with 15 percent in 1970.” Simply, the middle-class suburb is facing extinction.
The second article, “Gentrification threatens to displace residents in the inner suburbs as well as in the District,” is a column by Robert McCartney for The Washington Post. Here, the focus is on the redevelopment of lower- and middle-income housing units into more expensive units, thereby displacing longtime working class residents. In order to access affordable housing, families are being uprooted and children are forced into new (often worse) school districts. Where families choose to stay, parents are often taking second and third jobs to afford the increased housing expenses.
To be sure, the “suburbanization of poverty” discussion is not new. For the past year, numerous articles have espoused the claim that poverty is growing faster in suburbs than cities. In response, ICIC’s research team put the claim under a microscope. In order to understand the truth behind suburban poverty, ICIC examined detailed data on urban and regional dynamics.
Perhaps the most important finding is that a suburb’s proximity to the city has a massive impact on the local poverty rate. From 2000-2008, inner ring suburbs, or those closest to the city, saw poverty grow by less than 25% of the national rate. Meanwhile, outer suburbs experienced poverty growth that was 50% higher. Put another way, poverty in inner ring suburbs grew by 6.2% compared to a whopping 16.2% in outer suburbs. In fact, when several geographical areas were examined (including rural and metro level geographies), researchers found that inner ring suburbs experienced the lowest poverty growth of any non-urban geography.
From this data, we can conclude that inner ring suburbs benefit from the assets associated with cities. Yet, in 2010, the Associated Press wrote, “The American suburb is no longer a refuge from poverty in cities.” The common vision of American cities as problems to be fixed—or at least contained—undermines the role of cities in the national economy.
The growth of suburban poverty notwithstanding, ICIC also found that absolute poverty is still more prevalent in cities than suburbs. Often, academics and policymakers analyze merely urban vs. suburban poverty. But when rural locations are separated from true suburbs, absolute poverty remains highest in cities. Cities are home to 10.9 million urban poor; the suburbs are home to 10.7 million and rural “suburbs” are home to 1.8 million. “Recalculating absolute poverty across geographies after adjusting for the lack of a rural classification reveals that one of the key claims about suburban poverty—namely, that the number of suburban poor exceeds the number of urban poor—is simply not accurate,” writes ICIC’s research team.
The point isn’t to create a competition between who can have the highest levels of poverty. Instead, ICIC’s research seeks to change the direction of the urban/suburban conversation. Urban and suburban economies are interloped; we should be looking to flexible, regional approaches that have deliberate strategies to lift residents out of poverty.
And, despite growth in suburban poverty, researchers find that most effective target in fighting regional poverty remains in cities. “Any approach that does not treat the city as a focal point would be inefficient at best, not only causing cities to fall further behind their regions, but stymieing growth for the entire region.”
BY Amanda Maher on April 16th, 2013
Are Kitchen Incubators the Greatest Thing Since Sliced Bread?
Photo: Hot Bread Kitchen operates an incubator program, HBK Incubates that offers affordable commercial kitchen rental and comprehensive business support services
First it was food trucks, and now it’s kitchen incubators. They are popping up in cities left and right. Once a novelty, the kitchen incubator seems to have become commonplace.Kitchen, or culinary, incubators offer shared commercial kitchen space to help early-stage catering, retail, and wholesale food entrepreneurs get their businesses off the ground. The main draw of a kitchen incubator is that by clustering under the same roof, the businesses share costs. For most entrepreneurs, the notoriously high startup costs associated with the food industry such as purchasing equipment, finding affordable rent, and paying the licensing fees required of commercial kitchen space are cost-prohibitive.
Many incubators are run as non-profit entities by quasi-public organizations, such as local main street groups. Others are run as joint ventures out of vocational schools or universities. In most cases, a fee-based system (sometimes even a sliding scale depending on the entrepreneurs’ income) is used to charge tenants on an hourly, daily or monthly basis. In few instances, the incubators might operate as accelerators in which investors take an equity stake in their tenants.
There’s nothing really new about the kitchen incubator—the model has been around for over fifty years. But with the downturn in the economy, it seems as though more are creeping into our urban fabric. Fear of oversaturation aside, cities should embrace the model.
ICIC research indicates that food production, wholesaling and retail are important facets of the broader food cluster. To be sure, food is a major segment of the U.S. economy: more than 700,000 U.S. food establishments employ nearly 14 million people, 12% of the workforce.
Food cluster companies are also particularly important to our inner city economies. They are concentrated in small business: over 40% of all companies in the food cluster have between 1-4 employees; another 50% of food companies have between 5-49 employees. Moreover, the low educational requirements offer job prospects for inner city residents—60% of workers have a high school diploma or less, compared with 44% within the overall economy.
But despite the opportunities, ICIC has found that that there are challenges for urban food sector job growth, including access to space, financing and complexity. Production requires affordable small space to startups, especially in cities with limited, costly real estate. As aforementioned, equipment requires sizable up-front investment and few traditional lenders offer low-cost financing options. And because both cities and federal agencies oversee the food industry, the cluster can be difficult for entrepreneurs to navigate; a detailed understanding of regulations is necessary to be successful. Culinary incubators address these challenges.
Moreover, most incubators offer supplemental education to help teach entrepreneurs how to strengthen their business plans, navigate the intricacies of distribution, and comply with regulatory procedures. Thus, after the incubation period, food companies can spin off to create their own, stable businesses in the community with greater success.
Some kitchen incubators even take on a social angle. Not long ago, ICIC profiled La Cocina a San Francisco-based kitchen incubator. La Cocina is a nonprofit kitchen incubator located in the heart of the city’s Mission District, a working class community with a high immigrant population. Focusing on the woman and immigrant populations, La Cocina has successfully launched 11 businesses and houses 30 more. These businesses have created over 100 locally-based jobs and have created a foundation for financial independence for incubating companies.
In Saint Louis, a shared commercial kitchen at the BEGIN New Venture Center, asks each incubating company to pledge to train and support hard-to-hire populations upon leaving the incubator. Specifically, the incubator seeks to employ homeless and ex-offenders. The model is based on a culture of social responsibility and seeks to also develop this mindset within the incubating businesses. Kitchens that once operated as simply shared space are truly beginning to ramp up as places for business development and job creation. When concentrated in low-income areas (such as Kitchen, Inc. in Somerville, Massachusetts or CropCircle Kitchen in Boston), these kitchen incubators offer real opportunities for urban economic growth.
BY Amanda Maher on April 11th, 2013
When Leaning In Didn't Work -- Even For Sheryl Sandberg
We're not so sure about this whole Leaning In thing. Are women really not leaning in? Should we be leaning in more, and if so, how far forward are we talking? When is it OK, if ever, to lean back? What about leaning sideways -- are we good with that?
And does anyone know a good chiropractor, just in case?
There's no debate that Facebook COO Sheryl Sandberg is a powerful, successful, confident, lucky, rich woman. Excellent. We need more of those. Sandberg's new book, Lean In: Women, Work and The Will to Live, has renewed the discussion about the lack of women at the upper echelons of businesses and other organizations in the U.S.
As Sandberg writes, "Women hold around 14 percent of Fortune 500 executive-officer positions and about 17 percent of board seats, numbers that have barely changed over the last decade." Yet multiple studies have shown that companies with gender-diverse management teams and boards perform better than those that are run exclusively, or almost exclusively, by men.
Sandberg's conclusion is that women need to learn how to play better in a man's world. Her suggestions, in part, include smiling, saying "we" instead of "I," praising the boss, and working extremely hard to prove you've got what it takes to rise to the top even as you juggle work with raising a family.
There are good reasons, of course, for women to want to advance up the corporate ladder. And there are good reasons for companies to want them to, too. McKinsey ranked companies by the percentage of women on their executive committees. Those in the top 25% had a 41% higher return on equity and did 56% better in terms of their operating results than the companies with all-male executive committees. Not-for-profit Catalyst found that Fortune 500 companies with three or more women on the board showed a "significant performance advantage" over companies with fewer women. That's measured by return on sales, return on equity and return on invested capital.
The upshot is that companies that don't embrace gender diversity in a real and meaningful way are at a competitive disadvantage compared to companies that do. Managers that can't build diverse teams are sabotaging their own companies and hindering their ability to be competitive.
It's incumbent upon corporate America to do some leaning in, then, taking another look at diversity-averse managers and rethinking leadership training programs. Maybe this will happen. Cisco CEO John Chambers has already asked his management team to read Lean In, and to note three things that each member of the team will do differently in the service of championing more top-flight women.
Sandberg is also willing to take some responsibility here. She says that having more women at the top and talking up the advantages of diversity is a big part of what it will take to effect change. She says that's part of her mission.
Unfortunately, we have no idea how successful she's been. We sent a note to her Lean In Foundation, asking how many of Facebook's top 150 managers are women, and how that compares to the situation five years ago, before Sandberg joined. If they didn't have that information on-hand, we would have been happy with any other measurement showing women's recent progress at Facebook.
Lean In, the organization, said today that it's not able to comment on internal Facebook operations. Sandberg was unavailable for comment.
One of the few things we can use to assess Sandberg's influence is Facebook's situation right before its initial public offering last year. The social network was set to go public with an all-male board. Sandberg obviously knows what a mistake this is -- she cites the research in her book, after all, and more than 50% of Facebook's users are women. As COO, Sandberg was at the right hand of CEO Mark Zuckerberg. Maybe she didn't want a place on the board, although, given her insistence that women lean in, that seems unlikely. But even if she didn't, why wasn't she able to convince Facebook management to find another qualified woman?
Facebook did eventually appoint Sandberg to its board, but only after months of criticism and the obligatory hiring of an outside search firm. Facebook also added Dr. Susan Desmond-Hellmann, the Chancellor of University of California, San Francisco, to its board in early March, just as the all the publicity around Sandberg and Lean In was cranking up.
It's vaguely possible that Sandberg wasn't aware of these issues until the tempest caused by her own absence from Facebook's board, although we'd find that hard to believe. And the politics of her situation must have been extremely difficult. But it's still distressing that Sandberg, who is holding herself up as a role model for ambitious professional women, couldn't convince the Facebook team there was something economically sub-par with an all-male board. This is a woman who, by all accounts, is brilliant, is street smart, is championed by people like renowned economist Larry Summers, and who is leaning so far in that her nose is practically touching the ground.
If even she can't do it, maybe we need more than a change in posture.
One Thing New is the free email that delivers creative intelligence, news that matters, and a moment to breathe to smart, busy women who don't have time for email or for newsletters. Each dispatch is designed to connect you to the wider world, introduce you to a new personality or idea, or to free up a few minutes in your day.
BY Guest Blogger on April 9th, 2013
Can Grocery Stores Serve as Community Anchors?
Above: Philadelphia Mayor Michael Nutter shops at one of the Brown’s Grocery Stores (courtesy of CSMonitor)
We’ve talked at length about the importance of the food cluster. From urban agriculture to kitchen incubators, there are myriad opportunities to use food as a fulcrum for inner city job growth and business development.
Inner city grocery stores are another tool for urban revitalization.
Though often associated with “food deserts” – or geographic areas underserved by traditional supermarkets – grocery stores can have significant impacts on their local communities, far beyond nutritional and health benefits.
In a recent webinar, UpLift Solutions, a nonprofit working within the grocery industry, outlines the economic impact of supermarkets.
First, grocery stores provide hundreds of job opportunities. These markets hire the least-skilled workers and provide on-the-job training. Certainly, the entry-level positions at grocery stores don’t pay the highest of wages, but they offer a starting point for otherwise hard-to-hire residents, such as those who have been unemployed for long periods of time or who have a criminal record. The sheer size of the grocery industry offers significant opportunities for upward mobility. In fact, in some cities, grocery store employees are unionized, ensuring higher wages and benefits.
Second, grocery stores have been shown to increase nearby residential home values by 5-7%. Increased home values mean greater tax revenues for the city. In a city where the residential tax rate is $14 per $1,000 in home values, a $200,000 home would have a tax bill of $2,800. If the property value increases by 7%, the tax bill would increase by $196 per year. While this may not seem like a huge increase to city coffers, when many houses experience an increase in property values, the new revenues over several years begin to accumulate.
Third, grocery stores attract other retail uses to the community. In larger shopping plazas, the grocery store attracts other retail stores. The idea is simple: grocery stores are places where people need to go frequently (unlike, say, a suburban mall). When shoppers go to the grocery store, they are attracted to the nearby retail stores. The retail stores get a boost simply due to the traffic going to and from the grocery store. As they say, a rising tide lifts all boats.
But urban supermarkets aren’t without their problems. As the webinar explained, traditional grocery stores only have a 1% profit margin. If a traditional grocery store were moved from the suburbs to an inner city location, it would experience a 4% loss—or a 5% total gap in profitability. Contrary to popular belief, it’s not theft that leads to lower profits. Instead, a lack of transportation options in inner cities causes people to shop less frequently. Moreover, the shopping pattern of the urban poor works contrary to the way the traditional grocery model is designed: in urban markets, people buy fewer gourmet goods and high-margin items. Finally, the workforce is less prepared, requiring grocery stores to provide on-the-job training. As such, training in inner city neighborhoods costs about 400% more than it does in suburban locations.
So if inner city grocery stores cannot be profitable, how can we get entrepreneurs to develop such markets?
The Grocery Store as a Community Anchor
UpLift suggests a model in which the grocery store acts as an anchor for the neighborhood, providing additional programming and wraparound services for low-income residents.
A grocery store with a bank or credit union inside would benefit from high foot traffic. But the bank could also provide on-site financial literacy programs for grocery employees and shoppers. Education would touch upon topics such as predatory lending and the harms of cash checking services. This model has been implemented in the Brown’s Super Stores chain in Philadelphia with great success. In fact, Brown’s has since been rated one of Philadelphia’s best places to work.
Because grocery stores offer options for healthy, nutritious foods, they have significant health benefits for local residents, such as lower rates of heart disease, obesity and diabetes. While this is important, grocery stores could also work with community health clinics to provide additional services on site, such as nutrition, health and fitness education.
Moreover, providing these additional services allows grocery store operators to access new sources of revenue. The focus on community healthcare is particularly useful in accessing dollars from foundations and larger health networks.
What’s the Public Sector’s Role?
UpLift explains that the burden cannot be put on any one sector for achieving success. While entrepreneurs must be prepared to solve their own problems, there are two major ways the public sector can get involved in inner city grocery store expansion: First, revisit public incentives—many are currently anti-retail. For example, workforce development incentives tend to support high-tech or high-skilled jobs, not grocery store jobs. This effectively creates a permanent underclass, because the worse-off workers are unable to go from no work experience to a high-tech job. There must be middle of the road opportunities.
Second, the public sector should support (i.e. fund) local CDFIs that are willing to lend to urban grocery stores. Traditional banks usually only provide debt financing, whereas CDFIs provide some measure of flexibility (debt and equity financing) to help ensure that high-impact projects are built. CDFIs have proven successful in lending to housing developments, charter schools, and community health centers. CDFIs now have an opportunity to enter the urban grocery store market.
What do you think? Should inner city grocery stores be used as an employment stepping stone for inner city residents? Would the inclusion of additional community services make urban grocery stores more viable?
BY Amanda Maher on April 8th, 2013
Brickstarter: Moving From NIMBY to YIMBY
Crowdfunding—or the individual contributions by many to fund a particular project—have launched some really captivating, innovative products. The world’s first 3D printing pen was created through crowdfunding; aquaponics systems are becoming available to the average household; and technology and design are being combined to create new sweat-proof, wrinkle-free dress shirts for the active wearer.
Most of the ideas launched using crowdfunding produce a consumer good of some sort. But what if we were to use that model to fund civic projects? Can we “crowdfund” the city?
A few years ago, three designer friends decided that they wanted to build a pool in the middle of New York City’s East River. This floating pool would run using river water and an advanced filtration system. They posted their idea on Kickstarter, the most well known of the crowdfunding websites. They had a goal of raising $25,000, and ended up raising over $40,000 for their pool. It is one of the first known times that the crowdfunding model had been used for a capital project.
But innovation blogger Kevin Gray writes, “Crowdfunding capital projects is gaining momentum. In Bogota, Columbia, the 66-story BD Bacata Downtown skyscraper will be partly owned by the community. In Rotterdam, the Netherlands, locals crowdfunded a bridge. On New York’s Lower East Side, a pair of architects are creating, and crowdfunding, the first-ever underground park in an abandoned trolley car station.”
Bryan Boyer, a Harvard-trained architect, began asking questions like, “What would happen if you took the Kickstarter strategy and applied it to the city? How could we de-risk new shops, restaurants, cafes, services, institutions and even government outposts by aggregating commitment in advance of capital investment? What would the Kickstarter of real estate look like?”
Shortly thereafter, using the Kickstarter model as a guide, Boyer and three friends began to develop Brickstarter—a crowdfunding website to fund capital projects.
Brickstarter provides the local community with a forum to develop and fund the projects it finds of most value. Ideas that may otherwise get log jammed by local bureaucracy or postponed until a new budget now have another mechanism for moving forward.
According to the Brickstarter website:
Brickstarter reverses the polarity from NIMBY to YIMBY (“Yes In My Backyard”), from complain to create, outlining a platform for suggestions, developed and driven by participation of citizens, local business, and government. Brickstarter explores how to make it easier for communities to voice a productive and collective “yes” to their best ideas.
There’s no doubt: city budgets have been constrained due to the lingering recession. Building a new fire station, rehabbing a local park, or creating an after school music program just might not be in the cards for some municipalities. But if there’s enough demand for it, Brickstarter would provide a way for these initiatives to be funded.
While the idea is innovative, there are definitely challenges. Larger projects require multiple phases of construction. The project costs are often unknown, and recruiting individual donations for an environmental assessment will be much more challenging than funding a 3D printing pen that shoots melted plastic.
Nonetheless, Brickstarter is a new, innovative platform that could spur an unprecedented wave of citizen engagement that betters the city. At one point in time, Kickstarter likely had its critics, too.
What do you think? Can/should we begin crowdfunding civic projects? What do you see as some of the challenges of this model? Share your thoughts below and on twitter @icicorg.
BY Amanda Maher on April 3rd, 2013
Can Businesses Maintain The Culture That Fueled Their Initial Growth?
It can be done. Just ask the CEO of Chobani.
On May 21st at Harvard Business School (HBS), Chobani CEO Hamdi Ulukaya and HBS professor Joshua Margolis will jointly present “Making Sure Your Culture Does Not Spoil as you Grow” as part of the Inner City 100 Symposium agenda. Based on Dr. Margolis’s case study on Chobani, the presentation offers a unique opportunity to hear both academic and professional perspectives on one of the country’s most ascendant businesses.
The presentation will focus on a problem that many established businesses struggle with: namely, how to maintain the culture that fueled company growth while dealing with the new challenges that inevitably absorb scarce executive bandwidth as a company scales.
No company knows fast growth quite like Chobani. The company was founded in 2005 with a modest staff of five, and now boasts over 2,000 employees. Initially making due with one truck of milk per day, the firm’s operations demand an astounding 4 million pounds of milk daily to serve its customers. Chobani owns over half of the US Greek Yogurt market and 20% of the total yogurt products market, while powerful competitors like Danone and General Mills eye their market share and profits.
Chobani, like most great companies, was no accident; in a manner reminiscent of entrepreneurial, innovative companies like Apple, their brand and product are a result of coordinated product design, sales and marketing that make their yogurt more than the sum of its parts. As a result, CEO Hamdi Ulukaya has consciously strategized how to maintain the innovative culture that spawned the company’s meteoric rise. Between his specific experiences and Dr. Margolis’s wide academic purview, this year’s attendees will receive actionable best practices and insights to take back to their businesses and communities. Every journey begins with a single step- perhaps this will be the nudge that pushes one of our urban attendees to create the next great American industry.
Interested in hearing Chobani CEO Hamdi Ulukaya and Harvard Business School professor Joshua Margolis present the case in person? Register to attend the Inner City 100 Symposium, an intensive day of executive education for fast-growing urban firms. View the full Symposium agenda here.
1- Chobani: Growing a Live and Active Culture - Case - Harvard Business School http://bit.ly/WyQL96
2- Chobani Yogurt -Who We Are - Chobani Yogurt http://bit.ly/15VT4pE
3- Hidden Chobani Billionaire Emerges as Greek Yogurt Soars - Bloomberg http://bloom.bg/WyQOlf
BY Sathya Vijayakumar on April 1st, 2013
Do the “Bones” of Our Economy Suffer from Osteoporosis?
In his State of the Union address, President Obama stressed the importance of investing in the nation’s infrastructure in order to get the economy back on track. If approved, his “Fix it First” program would begin the repair of 70,000 structurally deficient bridges almost immediately.
This is a start. Yet the American Society of Civil Engineers (ASCE) released a report last week indicating that much more needs to be done. In the 2013 Report Card for America’s Infrastructure, ASCE gave the nation’s infrastructure a D+ grade. ASCE estimates that $3.6 trillion worth of investment is needed to bring our infrastructure up to par.
Traditionally, people think of “infrastructure” as our roadways, bridges, and transit. But infrastructure encompasses so much more than that: it includes things like our drinking water, hazardous waste, and energy facilities; power lines, dams, levees and ports.
The ASCE graded 16 different categories using a simple A to F school report card format. Few of the categories fared well. Solid waste ranked the highest with a B- whereas inland waterways and levees scored the lowest with a D-. On a positive note, no category ranked lower than it did when the last report was released in 2009. Indeed, solid waste, drinking water, wastewater, roads, and bridges all saw minor improvements.
Still, the results are dismal. “The infrastructure experts have diagnosed the bones of our economy with what is the equivalent to severe osteoporosis,” says Dr. Jason Hartke of the U.S. Green Building Council. Solid infrastructure is critical to support healthy, vibrant communities. It is essential for America’s long-term economic, employment, income and export growth.
Highlights from the report include:
Despite massive investment in road reconstruction through the American Recovery and Reinvestment Act (ARRA), 42% of major U.S. urban highways remain congested, costing the economy an estimated $101 billion in wasted time and fuel annually. Improving roadway conditions would cost approximately $170 billion annually.
Only 55% of Americans have any access to public transit. Where there is access, ridership has increased 9.1% in the past decade. Despite these increases, antiquated transit systems cost the U.S. economy $90 billion in 2010.
The nation’s 84,000 dams are an average age of 52 years old with the number of high-hazard dams on the rise. It would cost an estimated $21 billion to repair just the 14,000 high-hazard dams.
Much of the nation’s drinking water infrastructure is nearing the end of its useful life. There are already 240,000 water main breaks per year. Pipe replacement could cost $1 trillion.
- Levees, despite their D- grade, produce one of the largest returns on investment: the nation’s 100,000 miles of levees requires roughly $100 billion to repair, but these levees helped to prevent more than $141 billion in flood damages in 2011 alone.
Co-Founder of the Building America’s Future Coalition, and former Pennsylvania Governor Ed Rendell, explains just how far our infrastructure has fallen. “The World Economic Forum, just less than 10 years ago, ranked the overall American infrastructure as number one in the world.” The U.S. now ranks 14th. “It is a disgrace that in the richest country in the world, we’ve allowed our infrastructure to virtually crumble from lack of investment.”
Infrastructure improvements are particularly important to inner cities. The strongest proxy for infrastructure quality is bridge quality data: on average, more than 40% of inner cities bridges are deficient, which is a staggering 60% higher than the national average. Moreover, inner cities have twice as many bridges per square mile than the rest of the country, according to an ICIC study.
The bridge quality gap has cost inner city economies between 2% and 3% of their total job base—or upwards of a quarter of a million jobs—affecting key industries such as transportation, logistics, and services. Infrastructure improvements in America’s inner cities offer the best opportunity to restore these lost jobs and create new jobs, both locally and regionally. ICIC’s research shows that a 10% decrease in the percentage of deficient inner city bridges is correlated with a 1.83% increase in inner city economic growth, and a 1.69% increase in regional economic growth.
So how do we get there?
ASCE suggests a three-pronged approach to addressing infrastructure gaps. First, increase leadership in infrastructure renewal. During the New Deal era, some of the nation’s boldest infrastructure investments were introduced. Yet since this time, federal leadership has decreased; most infrastructure decisions are made without a cohesive national vision.
Second, promote sustainability and resilience: Infrastructure investments should be designed to meet the ongoing demands of today, but also the challenges of the future. Systems should protect the natural environment and withstand both natural and man-made hazards. The federal government should invest in R&D to develop new, more efficient methods and materials for maintaining our infrastructure.
Finally, develop and fund plans to maintain and enhance America’s infrastructure. This is really an iteration of the first two prongs. Plans should complement broad national goals for economic growth, resource conservation and energy independence. Creating financing methods should be explored to fund the reconstruction of infrastructure, but also to ensure that resources are used effectively and efficiently.
Visit http://www.infrastructurereportcard.org/ for interactive charts and to see where infrastructure in your community ranks nationally.
BY Amanda Maher on March 29th, 2013
Audible.com and Why Business Location Matters
Audible.com’s lobby in Newark. Picture Credit: bcdcnewark.org
Since ICIC’s founding in 1994, we have relentlessly sought to spread the word on business location in the inner city. In a continuation of this trend, we recently published research trying to answer the question “Do Inner City Firms Bring Opportunity to the Disadvantaged?” based on 2012’s Inner City 100 winners. Given our repeated emphasis on the topic over the years, it’s heartening to hear about stories like Newark’s Audible.com.
Early last week, CEO Don Katz was awarded the 2nd annual Kevin J. McKenna Award for helping to revitalize Newark through his decision in 2007 to locate his business in the urban core of the city. In a recent interview in the online magazine Next City (linked below), Katz described the thinking behind his decision and how the city and company have mutually benefited from their arrangement. Here are a few key points from the company’s story that are particularly salient to other cities and businesses thinking about urban renewal.
Molding a Talent Base from the Ground Up
In the interview, Katz goes into detail about the company’s efforts to contribute to education reform in Newark. The company decided soon after its founding to select their interns from North Star High School, a local charter school. What happened next is really unique and remarkable: the company decided to recognize the best students as “Audible Scholars” and provide them with a stipend and guaranteed jobs following graduation. This kind of investment, unusual in its local orientation and ambition, has the potential to make an outsize impact on the company’s surrounding area. Students get a platform for their ambitions that no one in their family may have ever had, the certainty of a job helps to stabilize the community, and the company gives back while building a local pipeline for talent that other companies can’t easily access. Whether you want to call it shared value or just good business, there’s little doubt that programs like this one are a potential model for other companies to consider as a best practice.
Income, Jobs, and Wealth
ICIC's mission is to drive economic prosperity in America's inner cities through private sector investment to create jobs, income and wealth for local residents.
Audible.com heard the word on this one; according to the interview, they’ve increased their staff from 120 to over 600 in just over 5 years. When further asked about the advantages of living in a smaller city, Katz cites that the rent for Audible.com’s facility is only a fraction of what it would in next door New York City. As far as next steps, he wants to encourage and help other tech companies move into the city to boost its fortunes and encourage the kind of growth that could really turn Newark around. Katz sees his location as a competitive advantage and his company as a model of a thriving Newark business that other companies to potentially emulate. Which leads us to…
The Long Road Ahead
Successes aside, it’s important not to treat stories like this as if they exist in a vacuum untouched by the broader forces that have long held Newark back over the years. As Katz himself states in the interview when asked whether he has seen employees moving into Newark:
“I did see both our ability to hire lots of people from Newark and also have people move into Newark. But the numbers have been very limited. It is partly that Newark has yet to develop that clustering of living environments and places to shop, eat and drink that is really required for urban rebirth. There is just not a concentrated sort of housing stock.”
The city’s long legacy of local mismanagement (notably improved in the last few years), redlining, and highway construction have left daunting challenges across a variety of key metrics. The way forward is clear. As Cory Booker himself said at last year’s Inner City Economic Summit, “If we could just focus on the fact that Newark is one of the largest port cities… if we could focus on the fact that Newark is one of the top college towns on the east coast, if we could just focus on the fact that Newark has an innate deep, deep history of art and culture… If we could build on these 3 strategies… you could create economic value here while solving America’s biggest problems.”
To find out more, read the full Next City interview, “Why Don Katz Bet on Newark.”
BY Sathya Vijayakumar on March 27th, 2013
What Are the Roots of Racial Economic Inequality?
The gap between the rich and poor is growing in America. It’s what fueled the “Occupy” movement; the 1% vs. the 99% became a rally cry to try to rebuild America’s middle class. Indeed, 1% of Americans own 37% of the nation’s total wealth.
While this seems straightforward, there are actually massive gaps within the 99% itself. A new study by Brandeis University looks at the discrepancy in wealth accumulation among races. “The Roots of the Widening Racial Wealth Gap” is a longitudinal study that tried to identify the causes between the black-white economic divide.
After tracing the same 1,700 households over 25 years, the study found that the wealth gap between white and African-American families nearly tripled, increasing from $85,000 in 1984 to $236,500 in 2009.
Data from the Pew Research Center confirms this: a 2009 survey of American households found that the median wealth of white households ($113,149) was 20 times that of black households ($5,677) and 18 times that of Hispanic households ($6,325). The recession took the hardest toll on minorities: from 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanics, 53% among African-Americans, but just 16% among white households.
What explains the disparities?
Despite popular misconceptions, there is no evidence that personal attributes (such as laziness) or behavioral choices (like substance abuse) contribute to the problem.
Instead, the Brandeis study found that where we live, where we learn, and where we work all factor in to the black-white wealth gap. Specifically, there are five factors that contributed to the divide: (1) homeownership; (2) employment; (3) inheritance; (4) college education; and (5) marriage.
Homeownership: The number of years a family owned their home was the largest predictor of the wealth gap by race. On average, white families bought their homes eight years earlier than black families, helping the white families to acquire wealth earlier on. Moreover, historical residential segregation has artificially lowered the demand for homes in traditionally black neighborhoods, meaning that black homeowners are less likely to see their property values increase with time. Of all factors, homeownership was the most important—it accounted for 37% of the wealth gap.
Income and Employment: The study found that, “At the respective wealth medians, every dollar increase in average income over the 25-year study period added $5.19 wealth for white households, while the same income gain only added $0.69 cents of wealth for African American households.” Researchers attribute the difference in pay to long-standing patterns of workforce discrimination. Black workers also tend to be concentrated in fields with lower pay and fewer benefits.
Inheritance: Of the families studied, whites were 5x more likely than blacks to receive an inheritance (36% vs. 7%, respectively). And those of those who were fortunate enough to receive an inheritance, the white families received 10x more than the black families. White families were more likely to invest the inheritance in a way to increase wealth, whereas the black families saved the monies for emergencies.
College Education: In an era where most well-paying jobs require a college education, the study finds that blacks are less likely than whites to go on to, and complete, college. Of those who do go to college, 80% of blacks leave with student debt, while the same is true for only 64% of whites. Nonetheless, the gap between students from high- and low-income families who earn a bachelor’s degree has grown from 31% to 45% over the past three decades.
Marriage: The Brandeis study looked at several social and cultural factors, and found that marriage has the largest impact—for whites: marriage increases the wealth of white families by over $75,000, but has no impact whatsoever on black families.
These findings are particularly important as we think of ways to lift inner city residents out of poverty. An ICIC analysis of the nation’s 100 largest inner city neighborhoods finds that 81% of residents are minorities. Despite comprising only 0.1% of U.S. land area, inner cities comprise 31% of minority poverty. College educational attainment—one of Brandeis’s five largest factors contributing to the racial wealth gap—is only 12% in inner cities, half that of the national average.
The Institute on Assets and Social Policy at Brandies stresses the importance of public policy in addressing the wealth gap. The report offers the following suggestions:
- Ensure mortgage and lending practices are fair and enforced to limit residential segregation.
- Raise the national minimum wage and enforce equal pay provisions to improve income levels;
- Invest in early childhood development to make sure that students are prepared for higher learning; from there, create policies to help more low- and moderate-income families attend college at an affordable rate;
- Eliminate preferential tax treatment for large estates and wealthy investors.
Low-income and minority families have the most to gain by implementing these policy suggestions. “But the first step is to recognize that the racial and wealth gap didn’t just happen. Policies created it, and policies can fix it,” writes Preeti Vissa in an article for the Huffington Post.
Reducing the wealth gap will help all families become economically secure, and will ensure economic growth for both our cities and our nation as a whole.
BY Amanda Maher on March 25th, 2013
ZipSpaces: A Bold Idea to Reactivate Vacant Storefronts
Car sharing, bike sharing, and now…storefront sharing? That’s the bold idea behind “ZipSpaces” – an effort to bring vacant storefronts back to life by renting them out on a timeshare basis.
Rebekah Emanuel is the mastermind behind this idea. As the name would indicate, she modeled the program after the well-known Zipcar program. ZipSpaces allows you to “check out” commercial space that would otherwise sit vacant. On Monday a storefront may be a health clinic, on Tuesday perhaps a farmer’s market. Tuesday night could even be an art gallery.
Similar to the online vacation rental site AirBnB, owners post their space and indicate what the space can be used for: does it include a kitchen, could it be used for a restaurant? Is there space for receptions or large gatherings? Is there an outdoor area? A stage for performances?
Renters view the spaces online and rent properties accordingly. A key card allows users access to the space for the period of time they have it reserved. Users report if anything in the space is left dirty or unclean, just as someone would when renting a vehicle.
ZipSpaces has integrated mobile technology to allow users to see what properties are available nearby and at what cost to rent. The same technology gives non-renters information about what pop-up shops are in their area, and will even alert you when your favorite vendors have set up shop nearby.
Online retailers and early-stage entrepreneurs have the most to gain from this type of program. It allows online retailers to test whether their company would be viable in a brick-and-mortar location. Startups and others with low capital gain access to use flex space legally and at a low cost. There is very little up-front investment required by the users of the space.
But there are major benefits to the city, as well. ZipSpaces restores vibrancy to the community in several ways:
Converts hazards into opportunities by transforming abandoned spaces into enticing offerings;
Brings new foot traffic to the neighborhood;
Creates a rich environment for entrepreneurship and business development;
Boosts volume of commercial activity in the neighborhood;
Provides a forum for public-private partnerships;
Offers insight in to the needs and trends of the business community; and
- Helps the city to rebrand an area through constant buzz of rapidly rotating businesses.
Some cities have already experimented with the idea. Most often, the vacant storefronts have been turned in to gallery space for artists. In Oakland, California, “Popup Hood in Old Oakland” allows users to occupy the vacant building rent-free for six months with the hopes that they will eventually become permanent storefronts. Part of the idea is creating a critical mass of shops so that the entrepreneurs can support one another and draw increased foot traffic to the area.
ZipSpaces takes the idea one step forward by opening the commercial space to a host of users for variable amounts of time.
What do you think? Should cities embrace this type of commercial space matchmaking? Would the high-turnover rate for businesses in the area be a help or hindrance to neighborhood revitalization efforts?
BY Amanda Maher on March 22nd, 2013
Haciendo Comida Mexicana Para La Comunidad - The Rico Way
When I was growing up, my Dad (who was born in Ciudad Juárez) and I would visit my grandparents to see what Mexican delicacies my grandmother had been preparing all afternoon. Grandma would spend hours in the kitchen making green enchiladas, tamales, menudo, refried beans, fideo (google it) and homemade tortillas. Today, the smell of Mexican food brings back fond memories of my childhood, including some of the people who made it special.
When I moved to Boston five years ago, I found it incredibly difficult to find really good Mexican food like my grandmother would make. As a native Texan who considers rice and beans as its own separate food group, this was quite the conundrum. I was comforted to know, however, that I am not the only person who had experienced such difficulties.
Jorge Fierro, CEO of Rico Brands in Salt Lake City, was in a similar situation. Fierro, also a native of Mexico, was consistently disappointed with what was available at the local grocery store for the Mexican food connoisseur. To combat such a travesty, Fierro decided to open up his own market and restaurant that could serve the freshest Mexican food products in Salt Lake. After showing significant success with the market, Fierro was able to secure a Utah Microenterprise Loan to turn Rico Brands into a high-growth firm. He decided to manufacture, label and distribute his “De La Olla” pinto beans.
Rico Brands currently employs 85 people at its Salt Lake facility that now produces 125 different products and distributes to more than 60 stores. The company’s success expanding its revenue sources led the firm to appear on the 2010 Inner City 100 list with revenues of $2.6 million.
Fierro and the Rico team aren’t just making a difference for Mexican food lovers everywhere, but they are also transforming their local inner city community (one tamale at a time). Of the 85 people Rico employs, 75% are inner city residents and 85% are of an ethnic or racial minority. Rico also sources 70% from the inner city. Salt Lake City has become a hub of “Creative Class” industries such as marketing and technology, but Rico Brands is delivering true impact to a burgeoning local market and changing Salt Lake City’s ability to provide solid employment to those who need it most.
Over the course of 15 years, the Inner City 100 has recognized 750 firms, such as Rico Brands, for using free enterprise to change their local communities and create value for inner city residents. Forty percent of the people that work at Inner City 100 firms are inner city residents. If you are interested in meeting local economic change agents like Jorge Fierro and Rico Brands, join us on May 20-21, 2013 for the Inner City 100 Symposium and Awards. At the Symposium, you will have the opportunity to network with the CEOs of the 100 fastest-growing inner city firms as well as attend case study sessions led by Harvard Business School professors and CEOs of fast-growing firms like Hamdi Ulukaya of Chobani. We will also have sessions led by former Inner City 100 winning CEOs and Founders such as Tim Westergren of Pandora Media and Tom Szaky of TerraCycle. You can view the full Symposium agenda here and register for the Symposium here. We hope to see you there!
BY Alex Rodriguez on March 19th, 2013
[Study]: Low-income households hit hardest by Sandy
Just four months ago, Hurricane Sandy wrought havoc from the mid-Atlantic region through New England. Transit ground to a halt. Businesses were devastated. Homes destroyed.
But until now, there was no hard data on exactly who was affected by Hurricane Sandy. Two related studies now paint a picture of the devastation. And unfortunately—we’re learning that those hit hardest are low-income families that already struggle to get by.
The Furman Center for Real Estate and Urban Policy at NYU analyzed the breadth of the storm surge and how many residential units were directly impacted. They found that nearly 300,000 people (3.7% of NYC’s total population), living in 76,000 buildings, were directly hit by Hurricane Sandy. Nearly half of all homes affected are single-family properties; 35% were 2-4 family homes, 12% were commercial properties and the rest were a mix of uses, including condos and co-ops.
Data indicates that over 80% of the homes in the storm’s surge area were built before 1983, the year of NYC’s most recently adopted flood-related building codes—making them more susceptible to hurricane damage. “It will be very expensive to adapt these buildings to the modern realities of more frequent and stronger storms, so it is important to understand what’s at stake and how much it could cost,” said Max Weselcouch, a research analyst with the Furman Center.
Indeed, 81.5% of properties hit in the surge zone experienced damage and submitted claims to FEMA. The primary cause of damage (94%) was flooding.
The Furman report also breaks down data by analyzing the types of NYC households impacted by Sandy and seeking FEMA assistance. Almost 55% are renters, and of these, 42% have a median income of $15,000 or less. Moreover, 85% of all renters affected earn less than $60,000. Impacted homeowners are similarly disproportionately low-income: 54.5% earn $60,000 or less.
A related study analyzed the data sets for both New York and New Jersey. Enterprise Community Partners compiled a comprehensive set of maps and analyses, which also found that low-income residents were in most dire need of aid after Superstorm Sandy.
Across New York and New Jersey, 57% of those who registered for FEMA relief are homeowners; 43% are renters. Of renters affected, the majority are low-income residents: 64% in New York City, 52% in New York State (w/o NYC), and 67% of those in New Jersey.
“With almost 50% of households making $30,000 a year or less, this is a big deal,” explains Shola Olatoye, Vice President at Enterprise. “These are low-income families already in need, and Sandy has made things so much worse.”
And it’s true. Many of these low-income residents are already struggling to make end’s meat. Many of the homeowners in the affected region were already facing the threat of foreclosure. Some reprieve was granted when banks voluntarily suspended foreclosure proceedings—but the delay could also cause a lag in neighborhood revitalization efforts.
What has become clear is that there will be a gap between what government and insurance companies provide for support verses the actual costs of repairs. “It is incumbent upon our policymakers and elected officials to figure out how to make up that difference,” says Olatoye. Otherwise, we will face an even longer road in helping vulnerable populations get back on their feet.
Rebuilding After Sandy
Amid the devastation, there is a huge opportunity to put residents back to work. ICIC research has found that the construction, housing, and real estate sector (CHRE) is a major component of inner city economies. The cluster’s strong multiplier effect means that, of all clusters, CHRE may have the largest impact of any cluster on inner city economic development.
The CHRE generates substantial employment with living-wages for a wide range of skill levels. These jobs tend to require little formal education and are very accessible to low-income residents. Moreover, CHRE has a high rate of self-employment and fosters entrepreneurship.
During the “Great Recession,” CHRE was hit hard—but the workforce once employed in this sector remains. Rebuilding in New York and New Jersey after Hurricane Sandy offers the possibility to put unemployed residents back to work. New housing, commercial facilities and infrastructure will help improve local quality of life and the competitiveness of these areas. A strong CHRE cluster will fuel growth in related clusters, including retail, entertainment and hospitality.
By combining FEMA and insurance claims with other state and federal programs, there is a real opportunity for comprehensive neighborhood revitalization. Local officials should look for ways to support the business community—such as through streamlined permitting and more flexible restrictions, in order to help get entrepreneurs back to work as quickly as possible.
In doing so, New York and New Jersey can serve as a model for disaster recovery in which low-income residents and inner city businesses are not just given handouts to get back on their feet, but are given an actual leg up to help improve their overall economic standing.
BY Amanda Maher on March 18th, 2013
Cities Continue as Hotbeds for Innovation
Due to state and federal funding cuts, cities have become the hotbeds for innovation in addressing social ills. To support these efforts, Bloomberg Philanthropies launched the Mayor’s Challenge, in which 305 cities entered their best ideas for a chance at winning a slice of $9 million in prize money.
Back in November, we highlighted the top 20 cities that were chosen to attend Ideas Camp. The finalists participated in an intensive two-day collaborative session in NYC to strengthen and stretch their ideas. Early this year, each city had to submit its refined ideas.
The top 5 winners have just been announced, with Providence, Rhode Island taking home the $5 million grand prize. Chicago, Houston, Philadelphia and Santa Monica each won $1 million.
So what was Providence’s big idea? It’s really quite simple, actually: to close the vocabulary gap between low-income and higher-income students in the city. The innovation lies in the method of doing so. The “Providence Talks” program uses technology to identify the number and types of words children hear each day, both at home and in daycare. The program gives feedback on the child’s vocabulary development and then vocabulary coaches help teach parents strategies to improve their child’s household auditory environment.
Closing the “word gap” is vitally important to ensure the success of students later in their lives. By the time children reach age four, research indicates that low-income children hear 30 million fewer words than their higher income peers. Currently, only one in three children entering kindergarten in Providence enters at the appropriate literacy benchmark.
The other winners included:
Houston, TX – One Bin For All: Combines existing technologies to create a one-bin, high-recovery system that will allow the city to recycle 75% of all waste. This program looks to commoditize the entire waste stream, taking it beyond curbside and single-stream recycling. Currently, cities only recycle about 30% of all waste, meaning that if this new system is successful, it will be a giant leap forward in helping cities become more sustainable. Houston’s application was also voted the “Fan Favorite” through a Huffington Post poll.
Chicago – The Chicago SmartData Platform: A plan to create the first open-source, predictive analytics platform utilizing collected city data. The goal is to aggregate information in one place to help city officials make smarter, faster decisions and prevent problems before they occur. This will improve efficiency and help save precious taxpayer dollars.
Philadelphia – Philadelphia Social Enterprise Partnership: This program seeks to build a bridge between social innovators/entrepreneurs and city government by reforming the RFP process. Currently, local procurement processes inhibit innovation—Philadelphia seeks to reform city procurement to ensure cities remain incubators of innovation.
- Santa Monica – The Wellbeing Project: To make communities resilient, people need to “feel good,” explains Santa Monica Mayor Pam O’Connor. The city seeks to define and measure residents’ wellbeing using an index that measures education, social connectedness and economics. The city will then use this data to help improve resident life.
Winners were chosen based upon four criteria: vision, ability to implement, potential for impact, and potential for replication.
In an interview on Morning Joe yesterday, Mayor Bloomberg really emphasized that he wanted cities to copy one another’s ideas: One of the requirements of the applications was that “it has to be projects that others can use as well…[mayors] tried to help each other [during this process] because we’re all in this together.”
BY Amanda Maher on March 14th, 2013
Do Inner City Firms Bring Opportunity to the Disadvantaged?
Written by: Mack Davidson, ICIC
As luck would have it, ICIC’s new inner city home in Roxbury, MA, is only a short walk from a nifty bakery-café. The café isn’t just a standout due to its savory soups or light, fluffy scones – although they are excellent! The icing on the cake, though, for this culinary gem is its staff. The café has made a determined effort to hire “disadvantaged” workers, such as former prison inmates.
Tapping overlooked, hard-to-place inner city residents as employees is exactly what ICIC encourages. The effort can lead to a win-win scenario. The employer ends up with a hardworking, loyal workforce. Meanwhile, the employees gain a foothold in the mainstream economy.
ICIC had this paradigm in mind when it reviewed survey results for 2012 Inner City 100 winners. Are those high-achieving firms recruiting “disadvantaged” workers from surrounding neighborhoods? What factors predispose them to do so? The following paper takes a stab at these questions. It also lays the groundwork for further research into this very human – and social – angle of urban entrepreneurship.
Key Survey Findings not to Miss:
Three factors explain a large share of the variation in minority representation at the firms.
A CEO’s impact on a firm should not be underestimated. The chief executive’s ethnicity is relevant to the percentage of minorities on staff – and more.
- Relying on referrals may shortchange a firm trying to cast the widest net for talent.
BY Guest Blogger on March 13th, 2013
Mapping a More Cohesive Urban Community
Each winter, Boston officials and volunteers take to the streets for a few nights to conduct a homeless census, including a count of people living on city streets, in shelters, in transitional housing and other temporary housing programs. Thorough data collection helps the city to design programs that meet the needs of this population.
In a recent article by Global Urbanist, author Marcus Tudehope highlights twelve reasons why community-led mapping and enumerations are powerful tools to return power and democracy into the hands of the urban poor. Here are a few reasons why:
Evidenced-Based Advocacy: Better data helps urban communities become more visible to local authorities. In Boston, for instance, unless city officials know the severity of their homelessness problem, they will be unable to provide services to help ameliorate the problem.
Raising the Community Profile: The very process of collecting data alone—regardless of what statistics are calculated—can raise awareness about a community. The process may attract media coverage and support from other local activists, politicians and religious groups concerned about similar issues.
Community Confidence: When the community is engaged in the mapping process, it helps unite individual voices into a more united front; together, these individuals have greater political power. Concerns of the underserved population are heard more loudly when supported with real, defensible data.
- “Counter-Mapping”: While public perceptions of a neighborhood may be based in some reality, the severity of problems (or not) can be misrepresented without official data. A “crime infested” area, for instance, may only have had a few incidents but their high-profile nature could tarnish the entire community. Counter-mapping refers to the development of alternative vantage points. Better data collection allows for increased transparency around hot-button issues.
Tudehope outlines these and other reasons why enumerations are important. Specifically, he hones in on their uses in third world, urban settlement evictions. He argues that communities are often dislocated for lack of information. For example, in the Old Fadama neighborhood of Accra, refined data collection helped prove that there were 24,000 residents—almost 2.5x the government’s estimate. Equipped with this data, the residents were able to prevent relocation and redevelopment of their urban settlement.
How is your city using better data collection, or community-mapping, to improve the lives of urban residents? What have some of the results been to date?
BY Amanda Maher on March 11th, 2013
Making the Case for Downtown Detroit [Report]
There’s been much ado about Detroit hallowing out for decades, followed by the resurgence of certain downtown neighborhoods. As some of the city’s largest employers, Henry Ford Health System, Detroit Medical Center and Wayne State University have driven growth in Midtown Detroit. Technology companies like Twitter have spurred economic development through the city’s Woodward Corridor. Young entrepreneurs and artists are relocating throughout the city’s urban core to take advantage of low cost infrastructure and housing.
While there is some consensus that downtown Detroit is growing economically and changing physically, until recently there had been little data to support the claims.
That changed recently when the Hudson-Webber foundation and its partners released a report titled “7.2 SQ MI,” referring to the 7.2 square mile area of “Greater Downtown.” Greater Downtown includes the neighborhoods of Midtown, Woodbridge, Corktown, Eastern Market, Lafayette Park, Rivertown and the Central Business District. The report captures data regarding this area’s residents, workforce, employers, visitors and investors.
In terms of quick demographics, the report finds that there are 36,500 people living in these 7.2 square miles, for a population density of 5,076 people per square mile (down 13% from 2000). The average per capita income is $20,216. While only 8% of residents in Greater Downtown are college educated, this number skyrockets to 42% for residents aged 25-34—one of the area’s fastest growing populations.
The report found many reasons to be optimistic about Greater Downtown: there are still several major employers in this area, including General Motor and DTE Energy. A staggering 97% of housing in the central business district is occupied—primarily by the workers of downtown companies who opt to live nearby. And downtown is still the home to sports and entertainment: from the Red Wings to Lions, to the Fox and Fillmore theaters, downtown remains a hot spot. Nearly 10.5 million people visit Greater Downtown each year to partake in the fun.
Several other amenities are sprouting in Greater Downtown. There are now 301 restaurants (49 with outdoor seating) and 300 retail establishments in this area. Combined with 77 cultural amenities, 108 acres of parkland, 11 miles of greenway and now 16 miles of bike lanes—it’s no wonder that people are once again concentrating in the city’s 7.2 square mile downtown.
Equipped with these statistics, Detroit’s leaders are better able to make the case for downtown business development. “Things are changing in greater downtown, and we needed to have a baseline of information that accurately depicted things for potential investors,” said Katy Locker, Vice President of the Hudson-Webber Foundation.
To attract businesses to the Central Business District, city officials may tout the low lease rate: Detroit’s CBD lease rates are $19.72 per square foot (above Cleveland and Minneapolis, but below Pittsburgh and Philadelphia). Vacancy hovers around 17%, meaning there is plenty of opportunity for new businesses to take root in the downtown core.
The City is trying to prove to the business world that it’s serious about its comeback; since 2006, $6 billion has been invested in real estate development projects in Greater Downtown. Even during the Great Recession, $3.9 billion was invested in a total of 70 projects. Since 2010, 65 more projects have been completed, 35 are under construction, and an additional 30 are in the pipeline.
Whether Downtown Detroit’s momentum can be sustained is yet to be seen. But the new “7.2 SQ MI” report can serve as a recruiting tool for businesses and bright minds alike.
“There’s an exciting story here, and if we tell that story people are going to start to think about Detroit in a different way, and start to look at Detroit as a real opportunity for business growth, for residential growth—the market can only get better that way,” says Kurt Metzger of Data Driven Detroit.
BY Amanda Maher on March 6th, 2013
The 2013 Sequester: By the Numbers
Last Friday, the American economy suffered another setback as Congress failed to replace the sequester.
The sequester is a $1.2 billion dollar package of federal spending cuts. To sequester means to remove or withdraw; in this context, it refers to the withdrawal of some of the funds that Congress has already approved. The purpose of the sequester was to help stabilize the national debt by reducing the total amount that the nation owes by $4 trillion over the next decade when combined with other measures that the administration has already signed. Back in 2011, Congress passed the Budget Control Act under the premise that if both parties couldn’t agree on a plan to further reduce the national debt, the sequester would take effect beginning March 1, 2013. In short, the sequester was agreed upon with the intention that it would never be passed into law. Indeed, it was designed poorly specifically so that lawmakers would have to fear the political blowback if it ever was passed. And yet here we are.
Over the past two years, Congress has already reduced the debt by more than $2.5 trillion. More than 2/3 of the reduction has come from spending cuts; another $600 billion has come from new taxes; $500 billion has come in the form of interest savings. Yet, we’re facing over $1 trillion of additional, arbitrary budget cuts in order to meet the $4 trillion goal.
Perhaps it’s fatigue from the coverage of the debt ceiling in 2011 and fiscal cliff in 2012, but there has been much less media coverage of the impact of the sequester. But just like the other budgetary crises, the sequester threatens thousands of jobs and could potentially hinder recent economic growth. As detailed below, the sequester will likely hit low-income residents particularly hard.
The Devil is in the Details: Decoding Sequestration
- Unemployment benefit checks will be cut by 9.4%. The average unemployed worker will receive $400 less between March and September, when cuts will be most severe.
- An estimated 2.1 million people will lose their jobs.
- Head Start programs, geared toward lower income families, face $400 million in cuts. Some 70,000 children will not be able to enroll for pre-school and daycare centers run by Head Start. Without a deal, more than 21,000 teacher and school staff jobs are threatened.
- More than 4 million seniors will be affected by cuts to the Meals on Wheels program.
- About 600,000 women and children will be cut from nutritional programs.
- Nearly $3 billion will be cut from the Hurricane Sandy relief package. Approximately 10,000 homes and small businesses won’t receive the funding needed to be repaired.
- Up to $540 million in loan guarantees to small businesses would be cut.
- A $51 million cut to food safety programs could result in employee furloughs and plant closures. We should expect food shortages and higher prices because less food will be available, by as much as 2 billion pounds of meat, 3 billion pounds of chicken and 200 million pounds of egg.
- The majority of the Pentagon’s 800,000 civilian employees will face furloughs starting in April.
Medicare, Medicaid and Social Security will, by and large, be left intact as-is. Opponents of sequestration point to this as a fatal flaw: these programs are among the nation’s largest sources of debt. Pell grants and veterans’ benefits are also exempt from cuts.
It’s time for Congress to stop playing roulette with the livelihoods of Americans. They have had plenty of time to devise a plan to reduce the deficit. Now time is ticking, and they owe it to their constituents to make a deal. What do you think about the sequestration?
BY Sathya Vijayakumar on March 4th, 2013
What’s on the Agenda for America’s Urban Heroes?
The fastest-growing firms in America are gathering in Boston to power up by accessing the tools and know-how that small businesses need to grow. The Inner City 100 Symposium: A Cast of Urban Heroes will make a bigger bang, pow or zap than ever before in celebration of the program’s milestone 15th year. Not only will participants receive a day of world-class management education at Harvard Business School, but they will also have the opportunity to learn from standout Inner City 100 alumni. Presenting companies, among many others, will include Pandora Media, Chobani, TerraCycle, Coyote Logistics, Emma and Revolution Foods. The full agenda as well as registration for the Symposium is now available online.
Who are America’s urban heroes? They:
• Turn trash into cash
• Work hard, play hard and study hard
• Innovate through the gift of music
• Revolutionize the way children are fed
• Manufacture the Italian art of delicious
• Help all pets fly
• Reinvent the world’s flavors
• Telecommunicate with your custome
Not to mention, they do all of this while creating economic opportunities for America’s inner cities.
This year is more than just another year of recognizing fast-growth inner city firms. We will be celebrating fifteen years worth of companies that are using their powers as engines of economic value to transform their local communities. In the fifteen-year lifespan of the Inner City 100 program, we have recognized 750 individual companies that do things as varied as manufacture pet products and organic baby food, pioneer internet radio and brew the best beer money can buy. Inner City 100 firms have also created over 73,000 new jobs and employ over 103,000 people – 40% of whom are inner city residents. They generate $2.1 billion of revenue annually and grow at an average outstanding year-over-year rate of 50%. And just think, they have accomplished all of this in an economy that might get your cape in a twist! These firms and their successes are worth celebrating, so we hope that you will join us on May 20-21st.
To guarantee your spot, register as soon as possible for this fantastic event. If you do so before April 1st, you will get a dynamic discounted rate of $300 to attend, which includes all of the management education sessions and meals on May 20-21st. We hope you will join us for this amazing showing of super-urban firms.
BY Alex Rodriguez on March 1st, 2013
Reclaiming Food to Create Healthy, Economically Secure Neighborhoods
Each year, U.S. retailers discard an estimated $47 billion worth of food—much of it still edible. Lightly bruised apples and freckled bananas get tossed; surplus meats and dairy that have passed the stamped sell-by date go to waste too. A recent study found that U.S. supermarkets discard an average of $2,300 worth of food per store, per day. What if we could reclaim these foods, price them accordingly, and sell them in neighborhoods that would otherwise have little access to healthy food?
There’s no better person to lead this effort than Doug Rauch, the former President of Trader Joe’s.
The grocery store chain has become wildly successful, in part for its ability to sell cheap but attractive products. But even Trader Joe’s has a surplus: Rauch estimates that 5 billion pounds of food wind up in Trader Joe’s garbage bins annually.
Drawing from his experience, the help of a board of directors that includes Jose Alvarez, the former President of Stop & Shop, and the strategic advice and partnership of Next Street, Rauch launched the Urban Food Initiative, a nonprofit retail store that seeks to revolutionize how groceries are supplied to America’s inner cities.
When launched, the first store, a 7,000-8,000 square foot retail market in Boston’s inner city neighborhood of Dorchester, will sell prepared foods such as soups, casseroles and stews—all of which will be low-fat and high in nutrients. The market will also house a community kitchen to teach local residents how to cook affordable, healthy meals.
The strategic location of this market is intended to ease the effects of living in an urban food desert—a large geographic area that lacks access to mainstream grocery stores. In such areas, residents over-rely on fringe foods from places such as convenience stores and fast food chains that are high in salt, fat and sugar.
Numerous studies have found that residents living in food deserts suffer disproportionately from diet-related health problems such as diabetes, obesity, heart disease and cancer. A study that analyzed Chicago’s food deserts found that in the neighborhoods with the least food balance (healthy vs. unhealthy foods), residents could experience up to a 40-year shorter lifespan due to diabetes resulting in premature deaths.
Yet even in areas with grocery stores, most healthy foods are too expensive for low-income residents to purchase. Urban Food Initiative seeks to turn the tide. “By partnering with local grocery stores, restaurants and growers, we will offer nutritious foods at up to 60% off…providing both economic and nutritional benefits to area families,” says Rauch.
Indeed, the first Urban Food Initiative store will have major economic benefits. Rauch expects to hire anywhere from 75 to 100 residents for the Dorchester store. This is consistent with the research by ICIC, Next Street and Karp Resources that found food cluster jobs are accessible for inner city residents. In addition, cheaper food will leave more money in residents’ pockets, and healthier diets will eventually lead to lower health care costs.
Does it sound too good to be true?
Perhaps. There are still obstacles to be overcome. First is the cost of transportation: It will cost $300,000 annually– or about 8% of the store’s projected sales. Trips must be frequent in order to get the food to the Dorchester store before it expires. However for many grocery stores, a service that takes away the surplus food has the potential to be very valuable and one that they may be willing to subsidize.
But the greatest challenge will be to convince residents that these foods are healthy and worth their while. Serving low-income residents unused, surplus food could be perceived as insulting. A joint education campaign with local service providers and health centers will be needed to mitigate residents’ concerns and educate shoppers to be more informed and savvy about labels and nutritional information.
The Urban Food Initiative is certainly one of the more innovative approaches to improving food access and stimulating the local economy. Solutions like the initiative offer the promise to make our inner city neighborhoods healthier and more economically secure.
BY Steven Pedigo on February 27th, 2013
The Rise of the 20-Minute Neighborhood
In cities everywhere, mayors and their planning staffs are designing cities that are pedestrian and bicycle-friendly. Fast-paced roads are being reworked to slow traffic. Two-lane thoroughfares are being changed to one-lane roads to allow for wider sidewalks and bicycle lanes. Mayors are putting a stake in the ground and declaring that cars are no longer king.
This is the mantra behind the 20-minute neighborhood. These neighborhoods are places where residents have easy, convenient access to many of the places and services they use daily, including local markets, restaurants, schools and parks—all without getting in the car.
20-minute neighborhoods are typically characterized by a vibrant mix of commercial and residential establishments within a one-mile walking distance. They are similar to traditional, walkable downtowns, but are popping up in neighborhoods outside of Main Street.
Where does the concept come from? As early as the 1920s, planners in the United States promoted the social advantages of physically defined neighborhoods with parks, shops and housing concentrated around a community center. Initially, this design placed housing no farther than a half-mile (10-minute) walk from the community center to promote social interaction among neighborhood residents.
The premise is also at the core of other planning principles, such as (1) New Urbanism—traditional neighborhood designs that encourage walking and socialization, with a variety of housing choices and a mix of retail and commercial spaces; (2) Transit-oriented development—high density and mixed uses within a quarter-mile of transit stations; and (3) Complete Streets—street designs that balance the needs of pedestrians and bicyclists with those of cars.
The benefits to 20-minute neighborhoods are seemingly endless: in addition to building a tangible sense of community, they reduce transportation costs, reduce greenhouse gas emissions, improve public health, and improve access to residents’ daily needs. Studies have shown that the average direct price of maintaining and operating a car in the U.S. is $8,487 per year; owning and operating a bicycle costs merely $400 a year in expenses and maintenance. It is estimated that, as a nation, $87 billion each year is lost on productivity and fuel while stuck in traffic. Another study shows that suburban moms, often carting their kids to and from places, spend 17 full days behind the wheel each year.
Portland, Oregon, behind the efforts of Mayor Samuel Adams, is taking the lead. In an interview with Fast Company, Mayor Adams noted:
We’re working to make every section of Portland a complete 20-minute neighborhood to strengthen our local economy. Two-thirds of all trips in Portland and in most American cities are not about getting to and from work. So if I can offer quality, affordable goods and services, eliminate food deserts, have neighborhoods with schools and parks and amenities—if I can create these 20-minute neighborhoods all over Portland—it strengthens our local economy.
And so far, it’s paying off. Portlanders drive 20% less than cities of comparable size. Every dollar not spent on vehicular expenses is another dollar that stays in Portland’s economy. Mayor Adams speculates that approximately $850 million stays in Portlanders’ pockets each year due to driving less frequently. Moreover, reduced congestion is helping to achieve the city’s climate change goals.
But Portland is just getting started. Only 11% of the city’s neighborhoods have achieved the 20-minute designation. Other neighborhoods still lack sidewalks. The city is doing market surveys to figure out the economic profile of a potential 20-minute neighborhood. The goal is not just to meet people’s basic needs, but to identify where people will go for play, recreation and entertainment. Then, the city can devise strategies for creating things like local parks and neighborhood schools.
In an interview with The Atlantic, Mayor Adams said the biggest impediment for achieving the 20-minute gold standard is a lack of data. “In a lot of cases, it’s the matchmaking of needs and wants that comes with analysis and insight. And that’s not free, but it doesn’t cost the kind of money it costs to expand arterial streets and freeways,” he says.
The other biggest challenge is getting people to understand the value of the trip not taken. The 20-minute neighborhood puts a high value on every mile not driven. One of the most difficult challenges to overcome has been securing federal funding for investments that prevent these unnecessary trips.
Yet investing in 20-minute neighborhoods, as challenging as it may seem, is an important way to increase equity. Because one-third of Americans do not drive, communities designed to primarily accommodate auto travel are inequitable. The cost of owning and operating a vehicle is too significant of a financial burden for some low-income families. A report by Portland State University finds that “increasing the frequency and connectivity of transportation routes that link low-income and working class communities can lower transportation costs and decrease the shared transportation and housing burden felt by many American families.” The 20-minute neighborhood, which emphasizes access to critical services within walking distance, can enhance social equity at the neighborhood level.
Mayor Adams believes that 20-minute neighborhoods are not unique to Portland; they can be replicated in cities elsewhere. In a last ditch effort to pitch the idea, he says:
I don’t think it’s partisan, I don’t think it’s ideological. In fact, in many ways, it’s a conservative pitch. You want to get the most out of the infrastructure you’ve already invested in. You want to be a more self-reliant city that isn’t as vulnerable to the vagaries of energy costs…In the process you actually make more of your business owners money, and save more or your residents’ household costs. It’s radical common sense.
What do you think? Are 20-minute neighborhoods feasible? Will people really give up their cars and opt for the 20-minute lifestyle?
BY Amanda Maher on February 25th, 2013
Big Cities Get Smarter. Big Companies Don't.
Businesses need to “think differently” when it comes to the world’s largest cities. This is a mantra urged by Next Street Founder, Chair and Managing Partner Tim Ferguson in a recent thought leadership piece published in TLQ digital magazine. In the article, “Can Big Business Keep Up with Big Cities?” Ferguson argues that commercial institutions of tomorrow will be distinguished not by their size but by their outlook.
The article points out that, worldwide, the increasing size of cities is projected to produce a billion new consumers and $20 trillion (not a typo) in new annual spending by 2025. Yet three out of five CEOs in a large-scale survey by McKinsey described cities as “irrelevant” to their companies’ plans. Further, Ferguson points out that the banks are missing a large shift in the American economy from tangible assets like buildings to intangible assets like domain names. What explains this disconnect of epic proportions?
“Great corporations looking to grow at the pace of the world’s great cities need to look beyond their own manifest advantages in capital, systems, and scale. They need to think differently.” – Tim Ferguson
Drawing heavily from a brilliant paper by physicists Luis Bettencourt and Geoffrey West that sought to find universal laws that drive the growth of all cities, Ferguson argues that the disconnect mentioned above is driven by an inability of firms to see beyond their local advantages and see the broad forces at play globally. Given the inexorable growth of cities and the innovative firms that will scale to a rhythm unfelt by the comfortable confines of the corporate boardroom, the article puts large companies on guard that, if they don’t think differently, they may be left behind by the coming flood of urban markets.
BY Sathya Vijayakumar on February 21st, 2013
How To Keep Your Budget Relevant All Year Long
By Brad Farris, EnMast
I’m a bit of a budget freak. For me, a budget is the most useful tool you have for running your business. But I know this isn’t true for everyone. I know that for most people a budget is something you work on at the beginning of the year and then don’t touch the rest of the year. And that’s a shame.
Here’s how you can make your budget more dynamic and useful all year long.
First, your budget can’t be a static document that doesn’t change. Your business is changing so your budget file needs to change with it. I update my budget monthly, as part of my monthly review process with my management team. We look at the assumptions, and update them based on what we know now. We look at the sales forecast, and adjust it to what our pipeline looks like. With that sales forecast, we ask ourselves:
- How's our capacity?
- Do we need to hire someone new?
- How are our expenses? Where are we spending too much? Where are we not spending enough?
If your budget file is dynamic, you can change things – the sales forecast, the roster and the expense assumptions – and see what effect your changes had on your bottom line for each month and the full year. That makes it a lot more fun to look at your budget! It gets you to start asking “what if” questions. What if I invested more in my marketing plan? If you know how well your marketing is performing ($/lead) then you can start to forecast what that investment could do in terms of sales and profits.
The other thing that makes me run for my budget is unexpected changes. When my 3rd largest customer gets acquired by a bigger company, I ask my budget to tell me what that means for my cash flow. Of course I’m going to replace them, but how long will it take? Do I need to delay the search for a bigger office for a couple months?
Once I got addicted to the real-time info that my budget gives me, I decided to spread that knowledge to my key team members. I didn’t just give them access to the budget file – I determine our bonus pool based on our performance to the budget we set at the beginning of the year. There’s nothing that keeps the team engaged in our budget like tying bonus payments to it!
Reviewing the budget is like giving our business a physical exam — it lets us check the vital signs of our business and get an early warning of any underlying problems.
Creating a dynamic budget is not rocket science but you might need a little hand-holding in the beginning. I wrote a free -book called Ask Your Budget: Amazing Questions a Small-Business Budget Can Answer complete with videos and templates to walk you through the process.
Is your budget dynamic or stagnant?
BY Guest Blogger on February 19th, 2013
ICIC Research Indicates State of the Union Promises Are On Point
Image courtesy of wbur
“It is our generation's task…to reignite the true engine of America's economic growth – a rising, thriving middle class,” said President Obama during his State of the Union address on Tuesday.
These words are music to the ears of inner city residents everywhere. Indeed, unlike his 2013 Inaugural Address, President Obama’s speech on Tuesday gave credence to the fact that Americans are still struggling; despite improvements in the economy, our lowest-income residents still suffer from a high cost of living and mediocre wages.
For months, Washington has been tiptoeing around fears of the fiscal cliff, the debt ceiling, and the sequester.
But as Obama said Tuesday night, reducing the deficit isn’t an economic plan. “A growing economy that creates good, middle-class jobs – that must be the North Star that guides our efforts.” We must find ways to create jobs, train workers to fill these jobs, and ensure that these are well-paying jobs. We must also find ways to lift residents out of poverty.
How do we get there?
Obama honed in on manufacturing as a primary means of job creation. Several companies are bringing manufacturing back to our shores; Caterpillar for instance has brought jobs back from Japan, and Ford has brought jobs back from Mexico. Even Apple will be making their Macs in the U.S. again later this year. It’s no wonder that 500,000 manufacturing jobs have been added to the economy since 2009.
As ICIC research has shown, investing in the industrial economy can help ensure that urban residents have access to well-paying jobs. Industrial jobs tend to have low barriers to entry and require little formal education, making them accessible to inner city workers.
The ICIC research team found that in St. Paul, for instance, urban poverty rates are more than twice those of the region. But the industrial jobs in St. Paul are high quality: while the average St. Paul job pays just over $43,000, St. Paul industrial jobs average $47,600. At the Saint Paul Port Authority’s Business Centers, industrial-related jobs average wages of nearly $50,000 each year. Despite salaries that are 15% higher than the rest of the city’s economy, most industrial jobs at the Business Centers require a high school diploma or less. Moreover, every industrial Business Center Job yields roughly 1.6 additional jobs for the region—nearly 60% higher than the corresponding number for non-industrial jobs.
To spur growth in the manufacturing industry, President Obama announced the launch of three manufacturing innovation hubs, similar to the first hub in Youngstown, Ohio. In Youngstown, a vacant warehouse was transformed into a state-of-the-art lab to teach new workers advanced manufacturing skills, such as 3D printing. President Obama asked Congress last night to fund the creation of fifteen of these hubs throughout the country.
But even with these industrial hubs, we cannot truly support manufacturing if we don’t protect our industrial assets. Cities must proactively safeguard industrial land from being rezoned for residential and commercial purposes—a trend that has taken hold in many cities nationwide.
Aside from manufacturing, the President highlighted the need to invest in American energy. “We are finally poised to control our own energy future,” he proclaimed. In doing so, we open the door for new jobs, and safeguard families and businesses from unpredictable spikes in gas prices that have plagued us in recent years.
Again, this is good news for the urban poor. ICIC research indicates that overall, green jobs are growing faster in inner cities compared to other industries. In inner cities, green jobs experienced growth in the range of 6% to 12% from 1997 to 2008. In contrast, overall inner city jobs grew by only 1.3% over the same period.
Flint, Michigan – once devastated by the decline of the U.S. auto industry – is one city that is hedging its rebound on clean energy. The “Flint Clean Economy Project” strives to use clean technology as a strategy for creating good jobs, fighting poverty, and revitalizing Flint’s manufacturing sector. To do so, Flint is engaging in active supply chain construction and promoting cluster growth by encouraging linkages between stakeholders across the industry.
To ensure access to jobs in both the industrial and energy sectors, we must do a better job of educating students in the subjects of math, science and technology. “Right now, countries like Germany focus on graduating their high school students with the equivalent of a technical degree from one of our community colleges, so that they’re ready for a job,” President Obama said Tuesday night. Here in the U.S., our lack of emphasis on these subjects is putting the American worker at a disadvantage globally. Innovative programs like P-Tech in Brooklyn – which involves a public-private partnership between NYC Public Schools, the City University of New York, and IBM – help students graduate high school with their Associates Degree in computers or engineering. Models like these should be spread to schools across the country to ensure a strong pipeline of workers for the new jobs we’re trying to create in the energy and manufacturing fields.
Still, trying to support the energy and manufacturing clusters are for naught if we do not invest in infrastructure. In his speech, President Obama proposed a “Fix-it-First” program that would put people immediately to work on fixing nation’s 70,000 structurally deficient bridges across the nation.
Infrastructure improvements are particularly important to inner cities: on average, more than 40% of inner city bridges are deficient, a staggering 60% higher than the national average. Moreover, inner cities have twice as many bridges per square mile than the rest of the country, according to an ICIC study.
The bridge quality gap has cost inner city economies between 2% and 3% of their total job base—or upwards of a quarter of a million jobs—affecting key industries such as transportation, logistics and professional services. Infrastructure improvements in America’s inner cities offers the best opportunity to restore these lost jobs and create new jobs, both locally and regionally. ICIC’s research shows that a 10% decrease in the percentage of deficient inner city bridges is correlated with a 1.83% increase in inner city growth and a 1.69% increase in regional growth.
If President Obama is serious about “Fixing-it-First,” he should begin by investing in inner city infrastructure, which has for too long been subject to neglect.
In doing so, we’ll put inner city residents back to work. We’ll expand access to manufacturing and energy-related jobs. And, as Obama echoed on Tuesday night, we will “prove that there is no better place to do business than the United States of America.”
BY Amanda Maher on February 14th, 2013
3 Big State of The Union Takeaways for Businesses
Image courtesy of BigThink
In his State of the Union address last night, President Obama laid out an agenda remarkable among 2nd term presidents for its breadth and ambition. Among the array of policies he talked about, three passages stuck out for their relevance to urban communities and the people and businesses that call them home.
1) Raising the Minimum Wage
“Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead.” – Barack Obama
The room let out an audible gasp when President Obama announced the rebirth of this policy. During the heyday of Obama’s post-election euphoria in 2009, he had previously shown support for raising the federal minimum wage to a gaudy $9.50. The political realities of an entrenched congressional divide however have made even a call up to $9.00 an audacious bid. Conventional economic wisdom suggests that raising the minimum wage actually leads to less jobs as costs for businesses rise. But recent research has suggested that the increase in costs is offset by lower turnover costs and higher productivity from workers. While it’s not exactly breaking news that higher paid people perform better, disagreement on the economics and the worries of an economy still laboring under 7.8% unemployment make the policy’s fate an open question. If proponents are right, this could be a boon for inner city residents and additionally provide a lever for businesses to hire them. If they’re wrong, this could be a potentially large setback for small businesses with already tight payrolls.
2) Is the Climate Ripe for Climate Change Policy?
“We can choose to believe that Superstorm Sandy, the most severe drought in decades, and the worst wildfires some states have ever seen, were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science — and act before it’s too late.” – Barack Obama
What does global warming have to do with urban businesses? Like the argument over the minimum wage, proponents would argue that creating a cap-and-trade market for carbon could unleash huge innovation on the part of American companies to comply and exceed the policy requirements. And, unlike other sectors of the economy, we at ICIC have some reason to believe that inner cities may provide the kind of narrow space requirements and access to urban centers that these kinds of companies might require. Past Inner City 100 winners Watermark from Lowell, Massachusetts and Research in Motion from Portland, Oregon are cases in point of this thesis. If the climate is indeed ripe for climate change policy, let’s hope the critics are wrong about the effect it would have on jobs.
3) Taxes, Spending, and the Sequester
“I realize that tax reform and entitlement reform won’t be easy. The politics will be hard for both sides. None of us will get 100 percent of what we want. But the alternative will cost us jobs, hurt our economy, and visit hardship on millions of hardworking Americans.” – Barack Obama
Like the bulk of the media, ICIC has written extensively here, here, and elsewhere on the deleterious effects of these issues hanging over a fragile economic recovery. For a nation that once set its sights on beating the Soviet Union to the moon, self-congratulation over deciding to honor the spending commitments we’ve already racked up may seem like small potatoes. But recent decisions by Congress to postpone a fight on the debt ceiling are promising augurs of a future in which we may yet again set our sights on the impossible. While cuts on the $1.2 trillion “sequester” may yet derail recovery, it seems like the worst has past. Let’s hope that Congress continues its good behavior and takes the advice of one of our most revered presidents, Abraham Lincoln: “Devotion to the Union rightfully inclined men to yield somewhat, in points where nothing could have so inclined them.”
The State of our Union
Resolving disagreements over the minimum wage, climate change, and taxes and spending are daunting challenges that could have large implications for businesses and urban communities alike. But, in some senses, the return of battles over policy, instead of potentially destructive fights over things like the debt ceiling, represent a return to political normalcy and an indication that the state of our union is cautiously optimistic.
BY Sathya Vijayakumar on February 13th, 2013
To ward off economic loss, cities must battle climate change
The Northeast was brought to a standstill once again this weekend, as Nemo, the latest storm to wallop the region, made its way up the coast. Offices sent workers home and school children rejoiced in a fortuitous long weekend full of snow. Shuttered transit and a driving ban kept residents hunkered down at home. Businesses were left with no option but to close up shop for most of the weekend.
Nemo brought more than 30 inches to many regions in the Northeast, with Connecticut and Massachusetts bearing the brunt of the storm. Still reeling from the aftermath of Hurricane Sandy, New York and New Jersey each received about a foot of white powder.
Given the preponderance of catastrophic weather events hitting the nation in recent years, it’s worthwhile to look at the ways cities are adapting to climate change.
Of particular importance is how to adapt to rising sea levels; many of the nation’s largest cities and population centers are concentrated along the coastlines. A 2011 report by the Natural Resources Defense Council found that coastal cities like New York and San Francisco should expect “serious challenges” from sea-level rise, while Southwestern cities like Phoenix should anticipate water shortages. Midwestern cities, like Chicago and St. Louis, are urged to brace for larger storms and flooding.
In New Orleans, the effort to rebuild after Hurricane Katrina includes elevating homes and rebuilding levees that have been steadily shrinking.
Norfolk, Virginia has experienced a 14.5-inch rise in sea level over the past 80 years, which has prompted the city to conduct a feasibility study to ascertain whether measures like new dam structures can deal with the higher sea level.
NYC is in the process of planting a million trees, and has begun to implement a $1.5 billion, 20-year plan for green infrastructure to help reduce storm-water runoff. Statewide, Governor Cuomo created 3 commissions post-Hurricane Sandy aimed at improving emergency preparedness and response capabilities.
To be sure, these are only a few of the ways cities are adapting to climate change. Nearly every major U.S. city has begun efforts to address the great swings in recent weather patterns.
But Chicago stands out as a climate change pioneer.
Efforts began back in 2006 under Mayor Daley’s leadership. Inspired by the Kyoto international treaty for reducing carbon emissions, the City’s climate action plans have become one of the best models in the nation, according to the Georgetown Climate Center. The city’s “Lead by Example Workplans” identify more than 470 actions the city can take to adapt to climate change.
Climatologists told Chicago city planners that their city will feel more like a city in the Deep South than a Midwestern metropolis before the end of the century. They could expect as many as 72 days over 90 degrees by that time—up from a current average of fewer than 15 days. By 2070, the report implied that Chicago would be on pace to have more than 35% more precipitation in winter and spring, but 20% less in the summer. Heat related deaths would eclipse more than 1,000 each year.
In response, planners mapped the city’s hottest areas and have begun installing native plants, vegetative roofs, and removing pavement. Citywide, Chicago has heavily promoted green and cool roofs to reduce urban heat and heat-related health problems. The city has more green roofs than anywhere else in the nation. Chicago is also implementing best practices to reduce storm water and sewage overflows due to increased precipitation.
Addressing climate change is not just an environmental justice issue. Indeed, adapting to climate change should be part of a city’s economic development agenda.
Globally, six cities have collectively recognized that preparing for climate change is an opportunity “for economic growth and a key area for differentiation, improved competitiveness and a timely opportunity to kick start a green economy.” The more prepared the city, the more competitive it will be when extreme weather events occur.
Recent storms serve as an indicator: the tornadoes in Joplin resulted in $3 billion in losses; the earthquakes in Japan were a $30 billion event; Hurricane Katrina caused $133 billion in insured and uninsured losses. More recently, economic losses imposed by Hurricane Sandy hovered around $45 billion. It is too early to estimate the damage from Nemo.
Lower-income residents and small businesses owners, who tend to have limited resources, bear the brunt of the economic losses during these storms.
“Cities adapt or they go away,” says Aaron Durnbaugh, deputy commissioner of Chicago’s Department of Environment. To guarantee a prosperous urban economy for decades to come, more cities should follow Chicago’s lead, and take a detailed approach to mitigating climate change.
BY Amanda Maher on February 11th, 2013
Trend Alert: Public Entities Adopting Community Benefits Agreements
As cities continue to grow, developers are scooping up properties and building bigger, better buildings than ever before. In dense areas, new towers are reinventing urban skylines. In smaller and less dense cities, new four- to six-story mixed-use buildings are changing the character of neighborhoods.
But change doesn’t come easily. Oftentimes, community opposition can delay projects for years.
In order to push projects forward, many developers have initiated or agreed to Community Benefits Agreements (CBAs). CBAs are contracts signed by community groups and developers that require the developer to provide specific amenities and/or improvements to the local community. In turn, community groups agree to support the project. Mitigation can include a range of options, from environmental cleanup to park improvements, from workforce training to the promised hiring of a percentage of local workers.
CBAs are often used when a development project is perceived to negatively impact a low-income neighborhood, such as when an area that has traditionally provided affordable housing becomes gentrified.
There’s nothing new about CBAs. Their use dates back until at least the late 1990s. One of the earliest CBAs involved the $4.2 billion Los Angeles Sports and Entertainment District development, which sits next to the Staples Center. The proposed development included an entertainment plaza, a 7000-seat theater, a 250k square foot expansion of the L.A. Convention Center, retail businesses, a housing complex and a 45-story hotel. At least $150 million in public subsidies was going to be necessary to complete the project.
To gain community support of the project, and to make the public subsidies more palatable, the developers spent five months negotiating a CBA with the L.A. County Federation of Labor and a coalition of local organizations. The CBA concessions included the following:
- Commit $1 million toward community park and recreation needs;
- Maintain 70% of the 5,500 permanent jobs generated by the project as living-wage jobs;
- Adopt a “first source” hiring program, giving preference to local residents, particularly low-income residents living within three miles of the development or from the city’s lowest-income census tracts;
- Construct at least 100 affordable housing units, or 20% of total units created by the project; and
- Provide $125,000 over five years to fund the creation of a residential parking permit program in the areas affected by the development.
More recently, CBAs have been implemented in cities across the country. In 2006, the NYC City Council approved the redevelopment of the Bronx Terminal Market into the Gateway Center, a retail complex projected to cost nearly $500 million to develop. Staunch community opposition was reduced when the developer, the Related Companies, agreed to spend $3 million to fund job training to help Bronx residents secure jobs in the construction of the development as well as in the enterprises of the future tenants of the development. The CBA helped Bronx residents access living-wage jobs, prevented Walmart from becoming a tenant, and required Related Companies to acquire LEED Silver certification.
In Minneapolis, the Longfellow Community Council helped to create a CBA with a local developer who was building the Longfellow Station housing complex. The CBA requires 30% of the units built to be affordable (10% more than the city-wide requirement) and with access to green space.
While traditional CBAs between community groups and private developers are now commonplace, there’s been a new movement in which public service providers, such as utility providers, are signing off on legally-binding CBAs with the local community.
Earlier this week, PolicyLink hosted a meeting, “Equity and the Future of the American Economy.” Advocates convened to discuss how the nation’s spiking racial and income inequality is putting the economy at risk. Panelists discussed the various policies and mechanisms that can be used to combat growing inequality.
One of the tools mentioned was the CBA.
According to panelist Juliet Ellis, Assistant General Manager of External Affairs for the San Francisco Public Utilities Commission (SFPUC), creating CBAs has drastically improved the way it conducts business with local communities.
Back in 2008, the SFPUC ‘s Water System Improvement Project fell below the city’s goal of 50% local hires. As a result, community organizations put pressure on SFPUC, and all city organizations, not just to make a good faith “effort” to hire local residents, but instead to back these efforts up with quantitative results.
When the SFPUC began preparing for the $4 billion Sewer System Improvement Project for San Francisco, it had to meet the new mandatory hiring requirements for city-funded projects. If SFPUC was going to hire local residents, it had to ensure that local residents had the requisite skills to complete the job. SFPUC allocated over $1 million to City Build, San Francisco’s job training program, to train under- and unemployed residents for the sewer project.
Since then, the SFPUC has worked with Bayview-Hunters Point residents, who live alongside the SFPUC waste water plant, to remediate environmental concerns. In late 2009, an environmental justice policy was adopted that articulates SFPUC’s commitment to preventing and mitigating the environmental impacts of its activities, such as the noxious odors that had long been a complaint.
Rather than negotiating a new CBA in each community it serves, the SFPUC has operationalized its community benefits program. The program specifically identifies ways the SFPUC can support workforce development, community contractor inclusion, environmental justice, and the promotion of sustainable practices, education, arts and culture.
Service providers are massive entities that often employ thousands of residents and serve huge geographical areas—their ability to create a positive impact on their cities is huge. By adopting a “triple bottom line” to guide business decisions, service providers can create significant shared value in inner city economies.
BY Amanda Maher on February 8th, 2013
The Next Steve Jobs Might Hail from Newark - Here’s Why
Photo credit to Forbes
With gridlock on Capitol Hill, news of infrastructural improvements has more often come from the Chinese than the American press in recent years. In a step in the right direction however, the Washington Post reports that the Federal Communications Commission (FCC) recently submitted a proposal to create very powerful, free WiFi networks that would cover almost all metropolitan areas and most rural ones. While the project has generated news mainly because of the lobbying fight it has spawned between large telecommunications companies (AT&T, Qualcomm, etc.) and large technology companies (Microsoft, Google, etc.), the project would be a global first. Just as Eisenhower’s 1956 interstate highway project cut transportation costs and gave the U.S. a competitive advantage that many nations are only just approaching, this ambitious project by FCC head Julius Genachowski has the potential to give Newark and Palo Alto something powerful in common: access to the next wave of American innovation.
How would this help inner cities?
According to the article, “Cities support the idea because the networks would lower costs for schools and businesses. Consumer advocates note the benefits to the poor, who often cannot afford high cellphone and internet bills.” Unlike contentious national arguments over taxes and spending, the plan has the additional benefit of having already been tested and analyzed. In 1985, “when the U.S. government made a limited amount of unlicensed airwaves available to the public, an unexpected explosion in innovation followed. Baby monitors, garage door openers, and wireless stage microphones were created.” Fast forward a quarter century later, and one can only begin to imagine the innovation that might follow from low-income consumers gaining access to connected devices. Finally on the broader network, underserved resident participation would spur technologists to create products that could continuously monitor their health, improve the quality of their educations, and share tools that might allow them to eventually build their own transformative companies. If this project is successful, it is not an overstatement to suggest that the next Steve Jobs might hail from Newark rather than Palo Alto.
Some lawmakers fret that, in times of deficits and debt, the Treasury should not be denied the billions of dollars that could come from privately auctioning off unlicensed airwaves. However, these concerns are mitigated by the fact that the least painful remedy for our deficits is not cutting or spending, but growth if possible. If the FCC’s proposal results in the formation of new tax-paying companies that simultaneously prevent expensive health episodes from occurring, improve the competitiveness of our citizenry, and stimulate exports as other countries race to adopt our technology, then we might be able to look back in 30 years and call our fears of debt default completely unfounded.
Other critiques center on the tensions between private industry and public goods that have long dominated our discourse. Should the government contract public WiFi to telecom providers instead of trying to directly provide the service? A study by the Project on Government Oversight recently found that contractors charged the federal government more than twice the amount it pays federal workers for comparable services. On the other side of the argument, the telecom companies can claim justifiably that they would provide better, more robust service that would adapt with the times as they fulfilled consumer’s needs. While the details of its implementation will be settled by the political process, the stakes of the game belie the gravity of the prize: who will provide ubiquitous access to telephone and web services for the next century?
However the implementation plays out, the mere consideration of this project by the government represents a profoundly positive development for inner city residents and the nation at large. Reorienting the government towards taking responsibility for innovation rather than growth may even be the policy of the future and the success or failure of this project could be a bellwether for that change. It is this writer’s hope that just as the 19th century featured public rails and the 20th century featured public roads, the 21st century will be characterized by public airways and economic mobility.
BY Sathya Vijayakumar on February 6th, 2013
Will Obama’s Second Term Lead to More Urban Investment?
Image courtesy of the Washington Post
“We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else, because she is an American, she is free, and she is equal,” said President Barack Obama during his 2013 Inaugural Address.
Sure, there are exceptions to every rule. But more often than not, those born in the bleakest of poverty have a hard time rising out of poverty to join middle- and upper-class society. Growing up in an urban school system makes it more challenging to go on to college and obtain well-paying jobs.
Because poverty (19% of total national poverty), especially minority poverty (31% of national poverty), is concentrated in inner cities (which comprise only 0.1% of U.S. land area), it begs the question—what action has President Obama taken to improve distressed urban communities? Moreover, what’s on his second-term urban agenda?
Let’s begin by looking back at his first term. President Obama’s most sweeping legislation was the American Recovery and Reinvestment Act (ARRA) which included broad support for urban communities. The Act allotted $1 billion to fund Community Development Block Grants; $4 billion in increased public housing capital funds to make housing more affordable; and $2 billion in Neighborhood Stabilization Funds to purchase and rehabilitate foreclosed homes. ARRA also funneled $13 billion in Title I funds to disadvantaged K-12 school systems. Nearly $4 billion was distributed in workforce investment training dollars to help up-skill America’s workforce and train young people entering the labor market. Stalled transportation projects were brought back to life through $9.5 billion in infrastructure investment.
ARRA was expensive, but highlighted President Obama’s commitment to putting Americans back to work and lifting the economy out of the recession.
Less successful was the shelved American Jobs Act. According to the White House, “In urban communities, the American Jobs Act would modernize public schools, invest in roads and bridges, cut payroll taxes for every American worker and more.”
Specifically, the American Jobs Act would have suspended $245 billion worth of payroll taxes for qualifying employers and 160 million medium- to low-income employees. It would have allocated $62 billion for a Pathways Back to Work program for expanding opportunities for low-income individuals.
But President Obama could never muster enough Congressional support for the bill. The bill was essentially dead on arrival.
In lieu of legislation, President Obama launched the White House Council on Strong Cities, Strong Communities (SC2). Based in six cities, SC2 attempts to use bottom-up solutions to break down silos between federal and local agencies, and searches for innovative ideas to address urban issues. But as others have pointed out, SC2, much like the broader White House Office of Urban Affairs he created, “began as a public advocate for cities but quickly reduced its visibility.”
All the while, President Obama has made a concerted effort to divert funding from the suburbs and invest in making urban areas more transit-friendly, walkable and sustainable. In addition to $2.6 million in TIGER grants, $200 million in sustainable community grants have been doled out to promote dense, transit- and pedestrian-friendly development.
It’s safe to say that President Obama’s first term was a mixed bag of results on these policies: while he tried hard to invest in urban America, he faced challenges from members of the House and Senate wary of the significant price tag that these investments would carry.
Do things look better for Obama’s second term?
Unfortunately, not really. If anything, the second term looks bleaker for America’s poor—at least in the immediate future.
Technically at the end of Obama’s first term, but at the beginning of the New Year, the deal to avert the fiscal cliff crisis resulted in an end to the Bush Era tax cuts for individuals earning over $400,000 and families making over $450,000. While this does not significantly impact lower income Americans in itself, the deal’s failure to raise rates above the lower $250,000 threshold could spell deeper future cuts in national programs that disproportionately help the poor such as Medicare, Medicaid, and Social Security.
Although the debt ceiling was put off with minimal pain, President Obama must continue to navigate tricky issues like a looming government shutdown and the aftermath of sequestration without decimating the social safety net and vital investments in our future. But if we are to reduce the deficit, and by extension the national debt, this is a zero-sum game. The programs that target investment in our urban communities will be scaled back. There was already a $390 million reduction in Community Development Block Grants (CDBG) in 2012, or roughly 12% of the entire program. For example, New Orleans, one of the SC2 cities, lost 27% of its CDBG funding last year.
Given these fiscal touch points and the necessity of getting our long-term debt under control, we should expect similar cuts to other programs in Obama’s second term.
This isn’t to say that President Obama no longer cares about America’s cities—it’s just the economic reality facing our nation. Combine fiscal woes with other, non-fiscal agenda items, like gun control and immigration, and it seems as though poverty reduction and urban growth will be taking a back seat for the foreseeable future.
At the same time, cities are the hotbed of American innovation. Where federal investment lacks, cities will have to get creative with service delivery in order to improve economic conditions.
And let’s hope they do. Because if we’re truly going to create a society where a girl “born into the bleakest of poverty” has an equal chance to succeed, cities are going to have to take the lead.
BY Amanda Maher on February 4th, 2013
Flipping the Switch on Workforce Development
Photo courtesy of gadgets.ndtv.com
A couple of weeks ago, I caught a 60 Minutes report entitled “Are robots hurting job growth?,” and it got me thinking a little bit about what might be in store for the American workforce in the coming years.
As we get off the mat from the Great Recession, the term “jobless recovery” has been tossed around to describe an economy that is showing record corporate profits, a stock market that is humming, and an unemployment rate that continues to be high. It seems clear that the most recent recession was truly an economic realignment and it has forced us to ask ourselves, “Where are the jobs of the future?”
The outsourcing of U.S. manufacturing has been a reality for quite some time. Globalization and free trade agreements have pushed the making of cars, children’s toys and basically any other product to areas of the world with lower standards of living such as China, India, Southeast Asia and Latin America. A more recent phenomenon has been the outsourcing of low-skill service jobs to other parts of the world. Recently, however, manufacturing has begun to return to the U.S. at a smaller scale. But will that actually begin to translate into job growth, especially for those without a post-high school education?
Unfortunately, the answer is probably “no.” Manufacturing and assembly processes, as cited in the 60 Minutes report, are being taken over by various advances in robotic technology that are continuing to progress at astronomical rates. According to one example cited in the report, the cost of a manufacturing robot over the course of its three year lifetime is roughly the same as the average three year wage of a manufacturing worker in China. This has made it much easier for smaller American manufacturers to compete with their foreign, low-cost counterparts.
So what does this mean for the American workforce going forward and what are the policy implications of such a reality? It means that we need to prepare Americans for continued advances in robotics and to progress in their careers so that their jobs can become “robot-proof.” If our workforce fails to stay ahead of this inevitable curve, it is liable to be overtaken by it in such a way that a widening crevice between macroeconomic growth and upward mobility will develop for a large portion of our citizenry. Inner city residents particularly will need access to jobs that can provide them with a path to economic advancement. After all, robots need to be pre-programmed in order to do what needs to be done.
Expanded investments in re-education and re-training that would make a larger proportion of our population qualified for such positions would be a promising start. It is in no way a panacea for our current predicament, but it would set our economy on a track that is more likely to create shared growth in a more sustainable fashion. It could also allow us to create even more productive robotic technology that could spark the greatest industrial revolution since the “dot.com” era.
To see the full CBS News report, click here
BY Alex Rodriguez on February 1st, 2013
Better Streets Driving NYC Business Growth
All cities grapple with street design—finding the delicate balance between which space should be used for public transit, vehicular traffic, bicycle lanes and pedestrian access. New York City, the largest and one of the densest cities in the U.S., is no different. The NYC Department of Transportation recently released a report outlining its approach to street design projects, including the results that have led to greater safety, efficiency and vitality.
Perhaps the most interesting findings are how better street design has boosted the local economy.
Along 8th and 9th Avenues in Manhattan, NYC’s Department of Transportation installed the first protected bicycle lanes in the United States. In addition to a decrease in injuries (35% decrease to all street users along 8th Ave., and 58% along 9th Ave.), there has been up to a 49% increase in retail sales for locally-based businesses along 9th Ave., compared to just 3% borough-wide.
In Union Square North, a new pedestrian plaza, protected bicycle paths and simplified intersections helped reduce commercial vacancies by 49%.
After transforming an underused parking area on Pearl Street, Brooklyn into a pedestrian plaza, retail sales increased 172% at locally-based businesses compared to just 18% across all of Brooklyn. Seasonal outdoor seating and new façade improvements have paid off: there has been a 77% increase in seated pedestrians and 14% increase in sales at fronting businesses. The Pearl Street Business Improvement District held a total of 27 public events through the first ten months of 2012—signifying the business community’s continued investment in the area.
The use of Bus Rapid Transit (BRT), often considered an oxymoron for cities’ unwillingness to make the changes necessary for truly “rapid” services, has proved economically beneficial along Fordham Road in the Bronx. NYCDOT set aside entire curbside lanes for BRT service, gave BRT signal priority at intersections, and allows for off-board payment to streamline service. The result is a 71% increase in retail sales at locally-based businesses.
According to the report, there are several key treatments to making these neighborhoods great public places. The creation of new pedestrian plazas – first using temporary materials, later making full-scale capital improvements – is the first step in designing streets that advance business growth. The addition of street furniture and seating platforms has proven fruitful. Even just simple façade improvements, like striping and planters, help encourage local spending.
But none of these street design projects would be successful without the support of the local business community. Once the improvements have been made, they must be maintained. Agreements with local organizations have helped NYC ensure that these newly bustling corridors will not fall in to a state of disrepair. Formal agreements, like the Pearl Street Business Improvement District, keep business owners and residents continually engaged through programmatic events.
BY Amanda Maher on January 24th, 2013
Best Practices In Action: 4 Businesses To Look Up To In 2013
Photo courtesy of the BleacherReport
Earlier this month, I wrote a blog highlighting four focal points that small businesses should concentrate on in 2013. The focused calls to action are aimed to help small businesses scale in spite of the uncertain economic climate. When forming these 2013 “to do’s”, I thought about business standouts that have demonstrated sustainable growth in difficult economic times. Many Inner City 100 firms, averaging 50% annual growth, have carried out these small business best practices to help them scale. Below are four Inner City 100 firms that have put these New Year’s Resolutions into practice.
1. Develop a business strategy . . . really!
CEO Carly Markesich of Discover Gymnastics, (number 100 on the 2012 Inner City 100 and hailing from Houston, Texas) has taken advantage of her proximity to the University of Houston to find top talent to staff her gymnastics center. By leveraging the city’s primary anchor institution, Discover Gymnastics is able to provide a high-quality athletic opportunity that is lacking from its primary competition - public schools. Since most public schools are cutting arts and athletics budgets, Discover Gymnastics is well-positioned to differentiate itself from the competition. Its focused extracurricular program with well-trained gymnast instructors enables Discover Gymnastics to build its market share by offering what public school cannot offer.
2. It’s time to invest in your team
It is always important to invest in your team if you hope to retain your staff. The last thing any employer wants to see is attrition that takes a firm away from performing its core competencies because management is occupied with replacing staff. Remember, the actual process of hiring a staff member is not a value-added activity for any firm, yet it can be incredibly time-consuming. MMO Behavioral Health Systems of Baton Rouge (number 81 on the 2012 Inner City 100) has been able to avoid attrition not only by establishing a phenomenal culture of mutual respect, but also by investing in the professional development of its staff. The company is currently in the process of establishing MMO University, which will help expand its employees’ skillsets. As a result, CEO Rob Miller has rarely had to replace employees and has a team committed to providing quality mental health and learning new skills that can add value to the firm.
3. Re-examine your value proposition
One way to re-examine your company’s value proposition is to quote the late Admiral James Stockdale when he introduced himself during the 1992 Vice Presidential Debate, “Who am I and why am I here?” Reflecting on these questions is incredibly important as companies try to identify their value proposition and appropriate strategy. DeatschWerks (number 31 on the 2012 Inner City 100 from Oklahoma City) manufactures and sells high-performance fuel injectors. Given that every car needs a fuel injector, large players generally dominate this competitive space, with smaller businesses needing to identify niche-driven strategies, according to CEO David Deatsch. Instead of trying to provide the best fuel injectors to everyone,” DeatschWerks solely focused on producing and selling supped-up fuel injectors that appeal to anyone who may think that they belong in The Fast and the Furious movies. The company has been successful in identifying its target market and how it can best serve that market. DeatschWerks’ niche products and marketplace are why the company has shown its incredible growth.
4. Evaluate your capacity NOW!
I have heard time and time again from Inner City 100 firms how they invested heavily in marketing and business development when the economy went off a cliff in 2008, in order to capitalize on others’ timidity and grab market share. Mainstream Global of Lawrence, Massachusetts and CEO Juan Yepez saw such an opportunity and grew at an improbable rate throughout that period as a distributor of used and refurbished computer products. In fact, the company’s strong relationship with Merrimack Valley Community College helped it easily build its capacity and find talent in business development. Such an investment in human capital has provided beneficial employment opportunities for the local community as well as provided Mainstream Global with a larger clientele for future years.
BY Alex Rodriguez on January 22nd, 2013
Growing Healthy Cities, Healthy Economies
Photo courtesy of citylimits.org
Iron Chef was already a cultural phenomenon, and a craze for artisanal cheese and locally grown produce had long since spread beyond California. But since March 2009, when First Lady Michelle Obama broke ground on the White House vegetable garden, the country has been on notice that the importance of fresh, healthy food is being taken more seriously — and at the highest levels — than it has been in decades.
The sudden interest in food has the potential to bring more than high-quality meals and, perhaps, better health: It could also be the catalyst to create impressive employment growth in our cities, including our most distressed neighborhoods.
That’s not just because the food industry is booming, accounting for about 11% of the U.S. economy and employing 17 million people. It’s because the food cluster is ideally suited to become a linchpin of inner city economic development.
To explain how cities can leverage the food sector to create jobs and entrepreneurship opportunities, ICIC recently partnered with the U.S. Conference of Mayors to issue an insights report. The report “Growing Healthy Economies” outlines reasons why the food sector can serve as a valuable source of economic opportunity for distressed urban cores including:
- Food is important in every geography. Everybody eats, which gives each city the opportunity to draw up a job-creating food strategy uniquely suited to its own priorities and self-image.
- Inner cities are home to disproportionate numbers of universities, hospitals, sports stadiums and cultural venues — all large buyers of food and all increasingly interested in sourcing fresh, locally produced goods.
- The diversity and density of the urban population provides a chance to cater to multiple niche markets that are underserved by traditional producers.
- Inner cities’ central locations, access to multi-modal transportation hubs and even under-utilized manufacturing and warehouse space can all be leveraged by companies in the food cluster.
- About 60% of workers in the food industry have a high school diploma or less, making food cluster jobs uniquely accessible to inner city residents. Some 91% of food companies have 50 employees or less.
The report also offers advice for how cities can tailor a unique food strategy based on a city’s assets and food demands. It’s easy to think of the food cluster in limited terms, such as restaurants—but the cluster is much more diverse and complex than that. With opportunities in packaging, transportation, distribution and logistics—for starters—there is a strategy to fit every city. Learn about initiatives and businesses that have been successful in the urban food sector. Get the report.
BY Mary Duggan on January 16th, 2013
Goldman Sachs Commits to Another City
Image courtesy of Community College of Philadelphia
Last week, Mayor Michael Nutter announced that the Goldman Sachs 10,000 Small Businesses program has arrived in Philadelphia. This announcement followed months of Mayor Nutter advocating for Philadelphia as the right city for the program to land next. Goldman Sachs agrees, citing that the city’s strong political partners, potential for economic growth and scalable business sector as all the desired attributes of a program partner.
During the announcement at City Hall Mayor Michael Nutter said, “This program will help small businesses in Philadelphia and across the region by providing access to capital and a world class business and management education program.”
Also as part of the announcement, Goldman Sachs publically committed $20 million to helping small businesses in Philadelphia. Half of that commitment will be applied to small business loans through the Philadelphia Industrial Development Corporation (PIDC) and Community First Fund. Another part of the commitment will fund the business education program provided by Community College of Philadelphia.
The 10,000 Small Businesses program consists of 100 hours of instruction in addition to evening sessions that include networking events, legal and financial clinics and other business assistance activities. The curriculum, developed by Babson College, is designed to help small business owners develop the skills needed to recognize new opportunities, embrace practices that increase business growth and create jobs in their communities. Classroom activities are complemented by an integrated portfolio of business services, including one-on-one business advice, legal and financial clinics, and networking opportunities.
The core content of the Community College of Philadelphia curriculum is outlined below, and addresses the particular needs of small business owners in the greater Philadelphia region:
- You and Your Business (Parts A and B)
- Growth and Opportunities
- Money and Metrics
- You Are the Leader
- It’s the People
- Marketing and Selling
- Strategic Growth Through Operations
- Being Bankable
- Putting It All Together (Parts I and II)
The first session of classes in Philadelphia will begin on Friday, May 31st. Applications are being accepted now until March 13th. If selected as a finalist for the program, business owners will be asked to attend a 20-minute in-person interview at Community College of Philadelphia. To view a full list of key dates, click here.
If you're a small business owner interested in learning more about the 10,000 Small Businesses program, click here. You can also tweet questions about the program to the PIDC (@PIDCphila) using the hashtag #10KSBPHL.
BY Mary Duggan on January 15th, 2013
Reckoning With Our Fiscal Reckoning
Image coutresy of CartoonBlog
To add some perspective to our current situation, small business blogs and news editors have rarely been forced to pay attention to government decisions as regularly as they have had to over the past year. Aside from industry-specific reforms (i.e. Healthcare Reform), and the occasional discussion of business tax credits or policy generally, it’s a compliment to America’s stable business environment that domestic companies haven’t historically had to worry about the government juggling their futures as going concerns. But that is precisely the precarious position that we find ourselves in today, one in which our country’s future is being held hostage to the messy contours of democracy. If last month’s congressional reckoning with fate was aptly named the fiscal cliff, then the multiple potentially treacherous slopes that will converge in 2 months could appropriately be described as something of a Fiscal Mount Everest. This article will attempt to run through what has already happened, what is left to accomplish, and some potential reasons for optimism.
What Just Happened:
As my colleague recently wrote in the piece What impact will the fiscal cliff have on America’s poor?, the “fiscal cliff” was a combination of large tax increases and service cuts that would have taken effect over the New Year if lawmakers hadn’t narrowly acted to prevent them. The tax increases were a result of the expirations of both the payroll tax cuts and the Bush tax cuts on income and capital gains. The service cuts consisted of yet another new term to the 2012 lexicon that citizens would rather forget- sequester, an agreement to implement $1.2 trillion in spending cuts that would be so politically and tangibly painful that Congress would have to address the long-term debt picture or risk potentially throwing the country into a self-induced depression. The end result? Congress permanently extended 98% of the Bush tax cuts, decided Social Security needed payroll taxes more than citizens needed the extra cash, and delayed the supposedly immovable sequester by two months. Complicating things, outgoing Treasury Secretary Tim Geithner announced on December 26th that we would breach the debt ceiling on December 31st. Since the New Year, Secretary Geithner has taken extraordinary measures to meet the government’s obligations for about two months, setting up the mythical Everest dive sometime in February.
Diving off Everest or Parachuting to a Soft Landing?
Metaphors aside (I’m aware that you probably can’t parachute off the world’s tallest mountain, bear with me), this leaves the upcoming political X-games with 3 main risks:
A failure to raise the debt limit that by all accounts would both throw the country into a recession (potentially a depression) and paradoxically blow up the debt by raising interest rates and hurting growth. Consider that the Bipartisan Policy Center estimated that we lost $19 billion in interest payments over the next decade from the last debt ceiling fight alone even though lawmakers managed to raise the ceiling at the last minute.
A failure to agree on long-term deficit reduction to replace the sequester, again resulting in a recession and paradoxically hurting our debt by hurting growth. As detailed in this piece entitled “How a Sane Political System Would Deal with the Fiscal Cliff”, the real problem is that our political system doesn’t seem to be able to come to obvious compromises and solutions.
- Washington finally comes together for a “Grand Bargain”, but it results in fiscal policy that either pushes our tenuous recovery back into recession or drastically impacts beneficiaries. With everything from Medicare to Defense spending on the table, politicians must navigate politically fraught waters while walking the tightrope imposed by the first 2 risks.
Amidst all this reason for pause, it helps to heed the words of Ben Franklin: “Let us take a cool view of the general state of our affairs, and perhaps the prospect will appear less gloomy than has been imagined.”
Reasons for Optimism
Foremost, while our democracy definitely isn’t orderly, its main advantage over other political systems is its flexibility. Though groups like Fix the Debt would be disappointed and maybe even a group of analysts at one of the big ratings houses would downgrade our credit rating, just averting crisis in February without significant long-term fiscal agreement would likely keep the government running and the markets from crashing. While it would be better for the country if Congress didn’t test bondholders’ appetite for debt, Japan, for instance, borrows money at below 1% on 10-year bondsdespite losing its AAA rating in 2001. If worst comes to worst, the existence of ideas like minting trillion dollar platinum coins, unilaterally raising the debt ceiling through the 14th amendment’s decree that, “the validity of the public debt of the United States… shall not be questioned”, and issuing coupons that substitute for debt suggest that the only real limitation to averting crisis is the nerve of our politicians. Here’s to hoping that politicians can get out of their own way and let business editors get back to business.
BY Sathya Vijayakumar on January 14th, 2013
4 Focal Points for Small Business in 2013
Image courtesy of Jay Author
As 2013 begins to come into focus, many small business owners are wondering how to approach the coming year. Even though political leaders were able to avoid the anticipated fiscal cliff, there are still some looming questions surrounding the debt ceiling fight that will soon be upon us and could have a major impact on small business. The current economic recovery appears to show some signs of progress, but how sustainable it is to create good jobs within the U.S. is unclear and up for debate.
That being said, there is still some tried and true advice that, after working to help nearly 300 small businesses find the resources they needed to grow, is highly pertinent regardless of the surrounding external environment. In fact, I would argue that such a re-examination of your current business model and a renewed dedication to best practices could help you to not only stay afloat in 2013 but also take advantage of new business opportunities that could increase your revenue line and hasten your firm’s growth trajectory.
1. Develop a business strategy . . . really!
You might be telling yourself, “I have been in business for ‘x’ number of years, of course I have a business strategy.” That may be true, but many business owners, including those of successful firms, confuse solid business practices, such as operational efficiency or advanced technology, with an actual strategy. In ICIC Founder and Chairman, Michael Porter’s seminal article What is Strategy?, he largely defines strategy as the “creation of a unique and valuable position involving a different set of activities.” A strategy involves trade-offs that have to be made in order to differentiate yourself from your competition and avoid a hypercompetitive environment that is likely to result in no business standing out. Mapping out your firm’s strategy will help you better resource the various functions of your company as well as set a vision that your team can fulfill.
2. It’s time to invest in your team
While you may be hesitant to free up cash while times are uncertain, you will have to free up a lot more if you are forced to replace your team. Without sounding too obvious, you also run the risk of having to make a lot of hires at once which makes it more likely you are to pick up a few carnations thinking that they are roses. Solid investments in your team such as salary and professional development let your workers know that not only do you appreciate their work and want them to stay, but also that you want them to grow with your firm. This will save you a lot of money in the long run.
3. Re-examine your value proposition
Have you asked yourself, “What is my company’s reason for being?” It’s hard to be successful without knowing the answer to this question. However, your value proposition can and should change over time as the competitive space in which your firm operates evolves. At a time when the capital markets are still relatively soft and the demands of the global marketplace are changing at record speed, it is important that you are able to define your value proposition in a clear and concise way that will hasten buy-in from internal stakeholders, such as staff and board members, and external stakeholders who might be looking to buy your product or service. Make sure that everyone on your team can answer this question as well so that they can become evangelists for what your firm is trying to accomplish.
4. Evaluate your capacity NOW!
I have heard numerous times that businesses were able to take advantage of market opportunities because they knew to invest in a forthcoming upswing within their competitive space. Many of these firms staffed themselves so they could do more work and generate greater revenues. Is there a cost to this? Yes, but there is a greater cost in not making this investment in building capacity. As the economy possibly improves, your firm will be unable to gain market share unless you look to expand your capacity, sales and operating, in a way that can sustain healthy growth.
Do you have any resolutions for your small business for 2013? Tell us about them.
BY Alex Rodriguez on January 9th, 2013
Can Relocating City Buildings Revitalize Inner Cities?
Photo: Renderings/Sasaki Associates and Mecanoo Architecten via The Boston Globe
In Somerville, Massachusetts, a small city just to the north of Boston, city officials are hoping a new library will serve as an anchor to its Union Square, a neighborhood in the midst of an economic revitalization.
This summer, Somerville received an $18 million grant from the Massachusetts Board of Library Commissioners for a $45 million new library in Union Square. The new library would serve as a public common; it will include an auditorium, community meeting rooms, classrooms, an outdoor courtyard, garden terrace and flex space for book sales, art displays and pop-up shows. “It’s about creating a space where people are coming together, having exchanges, being creative, versus a more traditional space where people come to read and check out books,” says SPL Director Maria Carpenter in the September/October 2012 edition of the Somerville Scout.
At the same time, the City of Somerville is considering relocating its City Hall offices to Union Square. In its original grant application to the MBLC, Somerville proposed creating a joint library-city hall building. The MBLC denied the request, and as City Planning Director George Proakis tells the Scout, “Saddling the library commissioners with financing the construction of a new city hall did not work so well.”
The end goal is to spur economic growth and in Union Square by making it the “city center.” The idea is not new. The City of Boston had undertaken similar initiatives. In 1981, the State Transportation Building moved to downtown’s Park Plaza. A decade ago, the city relocated the Boston branch of the RMV to Chinatown as a way to spark urban renewal. These projects have sparked additional economic activity, including the recent construction of several high-rise buildings.
Earlier this year, construction began on the $115 million office and retail complex in inner city Dudley Square, Roxbury. Boston Public School offices will open here in the fall of 2014. Five hundred city employees are expected to work in this building once it is complete. Not long ago, the Boston Police Department also relocated its headquarters to the Roxbury neighborhood. The city also wants to renovate the public library in Dudley Square.
Boston Mayor Tom Menino hopes the city’s investment in Dudley Square attracts private investment, akin to Chinatown’s redevelopment. “You’re going to see a rejuvenation of this whole area. It’s going to help people in the neighborhood to stay put because there will be more jobs and economic opportunity,” he tells the Boston Globe.
To date, “Programs aimed more directly at economic development have been fragmented and ineffective,” explains ICIC Founder and Harvard Business School Professor Michael Porter. “These piecemeal approaches have usually taken the form of subsidies, preference programs, or expensive efforts to stimulate economic activity in tangential fields such as housing, real estate and neighborhood development. Lacking an overall strategy, such programs have treated the inner city as an island isolated from the surrounding economy.…They have encouraged and supported small, subscale businesses designed to serve the local community but ill equipped to attract the community’s own spending power, much less export outside it.”
The comprehensive plans to move city offices to Dudley Square and Union Square, respectively, show each city’s commitment to the distressed urban neighborhoods, beyond the piecemeal approaches Porter references.
In Somerville, the library is expected to bring upwards of 1,000 residents to Union Square each day. The increased foot traffic is sure to be a boon to local businesses. At the same time, growth of Union Square will likely usher in some gentrification. City officials and neighborhood organizations are working hard to ensure Union Square remains an attractive, mixed-used community for people in all income brackets.
Tell us what you think….
Is moving city offices to inner city neighborhoods a good idea? Will it encourage further economic development in these areas? In what cities have these strategies proven effective?
BY Amanda Maher on January 7th, 2013
Counting Down The Top Small Business Blogs of 2012
The countdowns of 2012 are not over yet. Before we look forward to all the exciting developments that 2013 is sure to bring, we are looking back to toast the top small business blogs of 2012. What was important to America’s urban business leaders over the last year? ICIC’s five most popular small business blogs help highlight and recap the small business scene from 2012.
5... Advice From a Company to Watch
The founder of New York City-based Red Rabbit offered fresh advice to entrepreneurs who want to not only to grow their businesses organically, but also strategically. Rhys Powell started his business in 2005 out of a passion and has since refined his market strategy to scale. To help develop his business model, Rhys participated in the Goldman Sachs 10,000 Small Businesses program. Read more.
4...Introducing the 2012 100 Fastest-Growing Urban Businesses in America
On May 10th, ICIC along with its publishing partner FORTUNE, released a list ranking the 100 fastest-growing inner city businesses. The list, which included everything from craft beer distributors to green consultants, revealed interesting market trends and the drivers of a vibrant urban marketplace. The Inner City 100 list showed how businesses take advantage of their central location and available resources to outdo their competition. Read more.
3...The Future of Community Banking and What it Means for Small Businesses
Capital has proven a critical issue for urban business leaders. While access to capital is a challenge, more urban business owners have been turning to community banks in order to access the capital needed to grow. Through interviews with Inner City 100 CEOs, ICIC found that urban businesses are increasingly choosing community banks, which have a local footprint and take the time to truly understand their business needs. Read more.
2...Seven Questions to Ask a Potential Investor
One common barrier to accessing capital is a lack of understanding for how to speak with investors. As part of its monthly CEO Series, ICIC outlined seven questions that urban entrepreneurs should ask potential investors before closing a deal. Many entrepreneurs focus on impressing an investor during a negotiation and forget to ask questions to ensure that the investor is also a right fit for the business. The relationship between an entrepreneur and an investor should be beneficial to both parties. Read more.
1...Work Hard, Play Hard, Study Hard: Fastest-Growing Urban Firm Invests In Its Workforce
Topping the charts for small business blogs of 2012 is a feature on a company accustomed to being number one. Chicago-based Coyote Logistics ranked #1 on the 2012 Inner City 100 list, with a whopping five-year average year-over-year growth rate of 295%. The blog highlights just what it takes to be America’s fastest-growing urban business. Coyote’s unique workforce training program is one factor contributing to its success. New hires, who are recruited primarily from local universities, spend four weeks in Coyote’s classroom learning the ins and outs of the logistics industry, as well as customer service and presentation skills. Read more.
Is there something we missed in 2012? What topics are of interest to you in 2013? We are open to requests and guest blog entries. If you would like to submit a guest blog entry or bring an article to our attention, email Mary Duggan at email@example.com
BY Mary Duggan on January 4th, 2013
2012 in Review: ICIC's 4 Most Popular Economic Development Articles
It seems every time you ask someone how they’re doing they respond with something along the lines of “Busy, but good.” Well, here at ICIC, things are no different. The past year has been quite the busy one—but it’s been an exciting year full of urban business programming and economic development research and implementation. We’ve been in too many cities to count, including Chicago, New Orleans, Los Angeles and Salt Lake City. We also announced our strategic alliance with Next Street, which will provide cities and small businesses with a one-two punch for helping to create jobs and revitalize urban areas. In January, ICIC will be moving to Dudley Square, an inner city neighborhood, to co-locate with Next Street and begin maximizing our impact.
Given all that’s been going on, we decided to look back at our biggest economic development web articles for 2012.
Designing Walkable Downtowns Help Cities Reap Real Benefits: Perhaps one of the most anticipated urban planning books of 2012 was Jeff Speck’s The Walkable City. And it doesn’t disappoint. At the CEOs for Cities fall conference, Speck highlighted some of the key messages from his book. As most of us know by now, walkable cities are good for the local economy, for resident health and for the environment. But how do cities alter resident behavior and encourage them to drive less? First, create a reason to walk. Second, establish a safe walk. Third, make walks physically comfortable. And lastly, design interesting walks. Speck recognizes that street improvements can take significant time and monetary investment. Thus, cities should prioritize and begin with making their downtown areas the most walkable.
20 Ideas That Could Change Our Cities: Bloomberg Philanthropies is putting up $9 million to find the best ideas that could make our cities better places to live, work and play. The winner of the competition will receive $5 million in prize money; four others will receive $1 million each. We took a deeper look at three of the ideas: (1) Milwaukee’s Home Gr/Own seeks to change the food system in the city by turning vacant lots in to community assets that improve public health, spark economic growth and revitalize neighborhoods; (2) San Francisco’s City Job Works, which seeks to reduce unemployment while increasing government capacity by matching job seekers with professional development opportunities through micro-volunteering on city government projects; and (3) Syracuse’s International Village, which creates pathways to economic opportunity for refugees and new Americans. All three of these ideas could have major impacts in inner cities, particularly when it comes to creating new jobs and spurring business growth.
Food Trucks: Another Weapon in the Food Cluster Arsenal: Over the past year or so, we’ve seen an explosion of food trucks in cities across the country. What’s behind the movement? To start, the cost of business has increased in some cities. By some estimates, it can cost an average of $275,000 to open a new restaurant; a food truck can cost as little as $10,000 to get up and running. Given the tight credit market over the past few years, it takes more up-front capital to start new businesses. Food trucks help entrepreneurs enter the market more easily. But not everyone supports food trucks. Some argue that food trucks are too lightly regulated and as such, can be unsanitary. In some instances, food trucks aren’t subject to the same taxes or fees that brick and mortar restaurants face. Controversial or not—we should expect the food truck movement to continue spreading in 2013.
What Impact Will the Fiscal Cliff Have on America’s Poor? Perhaps the most timely blog of 2012, we break down how exactly we came to this budgetary impasse—and what impact falling off the cliff will have on America’s poorest residents. While it’s true that the bottom 20% of Americans face a smaller tax increase than wealthier Americans, the overall net impact on income will be harsher for those of lower incomes. The bottom 20% of Americans will see their after-tax income reduced by nearly 2% while the top 40% of Americans’ after-income tax will be reduced by only 0.1%. Add this to looming cuts in unemployment insurance and other discretionary spending—and America’s poor will suffer a major blow if Democrats and Republicans cannot reach an agreement. Five days and counting….
Is there something we missed in 2012? What are some of the topics that you’d like us to explore in 2013? We’re looking forward to researching and writing about the economic development topics that YOU find most useful in YOUR city.
Also – we’ll be expanding our guest blogging opportunities in 2013. Interested in guest blogging? Email Mary Duggan at firstname.lastname@example.org to learn more.
From the ICIC’s family to yours, we thank you for a very exciting (and busy!) 2012 and look forward to connecting again in the New Year.
BY Amanda Maher on December 27th, 2012
TAGS: walking | downtown | cities | bloomberg philanthropies | mayors challenge | milwaukee | san francisco | syracuse | food cluster | food trucks | fiscal cliff | poverty | urban | economic development
Why the Boss' Wife Matters to You
Image courtesy of flickr user Susanica
Written by Kimberly Weisul, One Thing New
Originally posted on One Thing New
The higher you go, the harder it gets.
No, that's not what mountaineers attempting Everest claim. It's what my super-high-achieving female friends have told me about the corporate world. For these women, it doesn't get harder because of the workload, or the travel, or because they manage more people. It gets harder because the higher up in an organization they go, the more sexist the men around -- and above -- them become.
I didn't know what to make of this when I first heard it. It wasn't my experience, but these women have made it higher up the corporate ladder than I. Now a group of studies, put together by Professor Sreedhari Desai of UNC-Chapel Hill, not only confirms this phenomenon but shows why sexism actually gets worse as you advance.
In a nutshell -- a very weird nutshell -- it's all about the boss's wife. Here's how Desai put it: "Husbands embedded in traditional and neo-traditional marriages (relative to husbands embedded in modern ones) exhibit attitudes, beliefs, and behaviors that undermine the role of women in the workplace." Desai defines a "modern" marriage to be one in which the wife works full-time outside the home. In "traditional" or "neo-traditional" marriages, the wife stays at home or works part-time.
How, exactly, do men in traditional marriages undermine women at work? If your boss has a full-time homemaker and corporate wife by his side, he's less likely to promote qualified female candidates, Desai found. He's less likely to feel positive about the presence of women in the workplace, and is less likely to think that organizations with a large number of high-level women are running smoothly. When it comes to his own career, a man with a stay-at-home wife is more likely to say that companies with lots of high-level women are unattractive places to work.
(There is no mention in the study of female bosses. But the sad fact is that once you reach the upper echelons of a company, your boss is more likely to be a guy).
Diane vs David
In one experiment, 232 male managers were asked to evaluate two resumes, each with stellar achievements, for a company-sponsored MBA program. One resume "belonged" to Diane and the other to David. That was the only salient difference between them. Men in traditional marriages overwhelmingly chose David for the company-sponsored MBA slot, while men whose wives had careers outside the home were about evenly split on whether Diane or David should get the nod.
If a guy is the breadwinner in his own household, it seems he's very likely to believe -- perhaps subconsciously -- that this particular arrangement is the way it should be. Desai describes these men as "a pocket of resistance to the gender revolution in the workplace."
And the higher up you go in an organization, the more likely it is that these men have stay-at-home wives. They need them, just the way Carly Fiorina's husband left his job the year before she became CEO of Hewlett-Packard. If you're putting in the hours, effort, and travel that it takes to get close to the C-suite, that doesn't leave much time for helping the kids with homework or hosting elaborate business dinners. For that, you need a wife, and the higher-ranking you are, the more likely you are to be making the kind of money that allows one spouse to stay at home.
Desai notes that these men, biased as they are, aren't consciously looking to hold women back. Ask them, and they'll probably say that while some married men may have outdated notions about marriage and work, they themselves are completely open-minded.
The obvious solution, of course, is for all married women everywhere to take on full-time jobs. That's not going to happen, and the way our society is currently structured, it would leave a lot of kids stranded at bus stops. But for those women working in a corporate environment, the science suggests that it's a good idea to find out what the boss' wife does for a living before saying yes or no to a job offer.
And if you're a married guy in management? Desai recommends taking an implicit association test, which is designed to reveal subconscious attitudes towards groups of people. Manager, know thyself -- and the awesome women around you.
One Thing New is the free email that delivers creative intelligence, news that matters, and a moment to breathe to smart, busy women who don't have time for email or for newsletters. Each dispatch is designed to connect you to the wider world, introduce you to a new personality or idea, or to free up a few minutes in your day.
BY Guest Blogger on December 21st, 2012
Baking Up Economic Growth in Inner City Detroit
ICIC has long been known for its cutting-edge research that helps policymakers and economic development professionals create jobs and prosperous communities. But ICIC is much more than that. Over the past several years, we have been ramping up our small business offerings—and now many high-growth urban firms make use of our suite of programs.
The Inner City 100 is a ranking of the fastest-growing companies located in America’s inner cities. The program not just spotlights these growing companies, but supports them through educational programming to continue to strengthen and expand their businesses. The program helps to identify the unique competitive advantages enjoyed by inner city businesses relative to their non-urban counterparts. The successes of the 720 Inner City 100 winners inspire political and business leaders, academics and the media to examine the inner city as an emerging market and a place of economic opportunity. The program has led to innovative investment programs, helped blaze a path for other inner city entrepreneurs and provided enormous stimulus for change in local communities.
Inner City Capital Connections (ICCC) is a free program sponsored by Bank of America designed to stimulate the flow of capital to inner city businesses. ICCC is the country’s only program that educates investment-ready companies about sources of capital and matches them with investors to grow their businesses and create jobs. The program helps growing inner city businesses:
- Discover the full range of financial options ranging from debt to angel, private equity and alternative funding
- Obtain one-on-one feedback from seasoned investors and consultants
- Optimize their business growth strategy to attract potential investors
- Build and strengthen relationships with investors
These programs aren’t fluff. They’re two of ICIC’s small business programs that truly ignite companies to grow. The proof is in the pudding….or, baked goods?
Jackie Victor and Ann Perrault, co-owners of Detroit-based Avalon International Breads, have participated in both Inner City 100 and ICCC. The programs have been invaluable to helping their business grow and achieve success beyond what they ever thought was possible.
In 2007, Avalon participated in ICCC for its first time. Equipped with knowledge on how to access new capital, by 2010 Avalon was recognized as the 97th fastest-growing inner city firm. By 2010, they had a year-over-year average of 12%. As a participant in ICIC’s small business programs, Avalon has received executive education from Harvard Business School professors, including Dr. Michael Porter. They’ve honed their pitch that makes the company more attractive to investors and position the firm for future growth.
Upon receiving the Inner City 100 distinction, the media took notice. Bloomberg Businessweek featured Jackie and Ann for their accomplishments as inner city entrepreneurs. Avalon, located in the underserved Cass Corridor of Detroit, has inspired other people to create and expend their small businesses to the area. Since Avalon has moved in, at least 12 other small businesses have opened in the neighborhood, many residential developments have emerged, and the Cass Corridor is becoming a vibrant little core.
Jackie and Ann credit ICIC’s programs for teaching them how to leverage their surrounding community to create solid business model that is sustainable for the foreseeable future. Unlike most of their competitors, Avalon’s retail operation did not take a hit from the recent economic turmoil in the US. In fact, they have been able to increase their workforce by 2/3 – a workforce that they tend to hire from the surrounding Cass Corridor community. And thanks to a loan from the Michigan Economic Development Corporation, Whole Foods, Main Street Bank, Invest Detroit and Bank of America, the company has recently invested in a 50,000 square foot bake house in addition to its two retail locations.
You can read more about Avalon’s involvement with ICIC programs as well as that of some other ICCC participants by checking out this feature on Fox Business.
Could either one of these program’s help your small business take that next step? If so, visit our “Resources for Inner City CEOs” page where you can find out more information on them as well as access online tools to help you lead your business to new heights.
BY Alex Rodriguez on December 18th, 2012
Promoting Equitable Urban Revitalization
Chris Haller leads the Urban Interactive Studio (UIS), a technology consulting firm specializing in web and mobile solutions for urban planning agencies and firms. He's the founder of EngagingCities.com where he helps urban planners understand and use the Internet and gives practical advice.
Last week, Haller wrote a blog for Engaging Cities reflecting upon the 2012 Inner City Economic Summit and ICIC's "What Works" campaign. That post is found below.
At the same time as our cities become more desirable places to live thanks to the draw of cultural facilities, parks, transportation, restaurants, and sporting events, they are also hurtled into the pursuit to find ways to accommodate growth. Since economic development initiatives are at the forefront of city agendas, we now wonder how to promote equitable urban revitalization and foster economic opportunity for all residents.
When the Initiative for a Competitive Inner City held its 2012 Inner City Economic Summit, participants left enlightened about today’s models and collaborative partnerships that can lay the groundwork for sustainable economic development.
Based in Boston, the Initiative for a Competitive Inner City (ICIC) is a nonprofit research and strategy organization and the leading authority on U.S. inner city economies and its businesses. Founded in 1994 by Harvard Business School Professor Michael Porter, ICIC strengthens inner city economies in a multitude of ways. The organization’s knowledge of inner city success factors and developing companies springs from their specialized urban networks and path-breaking research.
During their Inner City Economic Summit, civic and business leaders came together to share practices that are proving durable in this fiscal climate. In fact, ICIC’s flagship “What Works” campaign culminates each year at the summit. Established in order to answer the questions of how cities can promote equitable urban revitalization and foster job growth and economic opportunity for all residents, “What Works” is recognizing that solutions will flow from the public, private, and nonprofit sectors. This year they shared what they found to be the best city-led, business-led, and nonprofit-led solutions working in cities today. Equipped with a What Works blueprint, leaders could walk away with knowledge to create accessible jobs and maximize investment in their cities.
The hub of “What Works” is a compilation of “Practices in Action,” or the strategies being employed to address some of the nation’s greatest economic and businesses development challenges in cities. The goal of the “Practices in Action” aggregation is to be the go-to source that provides thought leadership, best practices, and innovative programs to create jobs in the communities that need them most. The platform, as a type of inventory, will allow stakeholders to engage and discuss solutions — to ask each other questions and examine how to overcome challenges that might arise.
Also highlighted at the summit were presentations such as, “The Role of Industrial Land in the City Landscape,” “Strengthening Public-Private Partnerships for Stronger Cities” which got at the heart of how to promote a dynamic urban marketplace powered by diversity, creative enterprise, and competitive advantages. Several talks looked at underserved businesses within cities. Topics ranged from how to engage them in economic and business development, how to connect underserved businesses to new revenue generating opportunities, and how to help underserved businesses sustain their scale and growth.
Over the course of the two-day Summit, ICIC staff and guest bloggers detailed what they heard during panels: intriguing new data on the changing demographics of America, creative ideas such as food clusters, innovative solutions in the area of economic development strategies, and further opportunities for revitalizing urban economies by building a successful inner city workforce.
Look for all program materials, slideshows, videos, and blogs posts from the Summit here.
BY Guest Blogger on December 17th, 2012
A Start-Up...Grows Up
Guest Blog by Jonathan McCredie, co-founder of Fennick McCredie, a 2012 Inner City 100 winner
Here at Fennick McCredie we were thrilled to be named among the top 100 urban growth companies in the nation by the Initiative for a Competitive Inner City.
Since the announcement the most common question has been “So…how’d you do it?” Looking back, some of the answers were a little surprising:
Focus. This one isn’t surprising. In fact it’s a bit overused – every company talks about focus. Still it’s good advice so we tried to focus and it worked. The surprising part however…
Our focus was never, ever on growth. True statement. Our focus is on client service. Deborah and I allocate the majority of our time to current projects and maintaining client relationships. This is the exact opposite of most growth firms and flies in the face of conventional wisdom. Just to be sure, we had our accounting firm run the numbers: industry-wide the utilization rate for firm partners (time spent on current projects) runs about 57%. At Fennick McCredie we ran 65%. On top of this we had zero full-time marketing staff. Conventional wisdom centers on getting new clients. We did the opposite, choosing to take care of the ones we had. How does a firm who doesn’t focus on new business, get new business?
Start humble. In the beginning we took smaller roles to work on the projects that most interested us. Partnering with larger companies got our foot in the door with clients who might have otherwise seen us as too small or too risky. An atypical approach, but a great educational opportunity – thanks to our partners we learned all about the inner workings of the industry: how to take care of clients, how to solve and even prevent problems, and how to make a difference. All this knowledge is only useful if, instead of chasing opportunity, you…
Stay present. By staying fully engaged in the project at-hand we got exposure that we otherwise might have missed. The process allowed us to hone our skills so when new opportunities arose we didn’t disappoint. It was only a matter of time before someone felt comfortable enough to hire us directly – at first for a small job, then later a larger one. Soon, we were getting referrals. A simple recommendation from one client to another carries more weight than an entire marketing department could unleash in a year. We were now credible in a world beyond the present, but only by focusing on the present could we truly become credible.
We are convinced that the reason this worked is because we focused on what matters to us, our clients. By not working towards growth, we GREW. There were of course other factors, not the least of which was luck (to some extent or another luck always plays a role, good or bad). As we look back however this contrarian approach served us well, and I’m certain could work for other start-ups looking for a chance – just one chance – to show their stuff.
BY Guest Blogger on December 13th, 2012
Burgeoning Businesses Start at the Brooklyn Flea
It’s no secret that new businesses have high failure rates. Investing in a new venture can be extremely expensive and entrepreneurs risk losing everything if their firm doesn’t succeed. On average, 50% of new businesses fail within five years (ranging from 51% in mining to as low as 36.4% for construction companies).
This is why so many entrepreneurs are looking for alternative, less-risky options for testing their businesses.
We’re seeing food trucks pop up on corners everywhere. Business incubators are allowing businesses to refine their models. And now, many entrepreneurs are using flea markets to get their businesses off the ground.
Flea markets? Aren’t these markets just full of….junk?
Not the case at all. Flea markets, by their very nature, provide opportunities for small business owners to gauge the demand for their goods. The flea market owner rents space to people who want to sell their merchandise—some low quality goods, or fair-type foods—but also very high quality, used goods. Vendors range from a family renting a table for the first time to seasoned business owners looking for a new audience.
CNN Money recently had a story on the Brooklyn Flea. In just five years, the owners have created a small empire. The co-founders have carefully curated the market to ensure that only high-quality vendors participate. Several fairs have spun off from the original Brooklyn Flea, including a food-only market.
By locating in a dense, highly diverse neighborhood like Brooklyn, the Brooklyn Flea experiences high foot traffic. This creates a prime opportunity for independent vendors to grow their businesses.
David Sokosh is just one of the vendors who has realized success.
A former art gallery owner, Sokosh could not survive the recession. He began to sell his personal antiques at the Brooklyn Flea. Items like clocks and watches were being sold like hotcakes. His stand was wildly successful and he realized there was pent up demand for antique watches. Sohosh spent a year studying with a watchmaker, and shortly thereafter, started his own business – Brooklyn Watches – three years ago.
It only took one day for Neill and Renae Holland’s business, Bon Chovie, to thrive at the Brooklyn Flea. Within three hours, their fried anchovies were selling so quickly that the couple had recouped all of their investment within just three hours on their first day at the market. From there, the Hollands knew they had to get serious about their business, and began to refine their operations for future success.
The Brooklyn Flea and similar markets serve as a boot camp for businesses, in some regards. The barriers to entry are lower, and companies don’t have to invest in brick and mortar locations, thus reducing risk. Flea markets teach entrepreneurs quickly whether there is an appetite for their goods.
Fortunately, for the vendors at the Brooklyn Flea, they do not have to cater to any one niche market. The Brooklyn population is one of the most diverse in the nation—from blue collar workers to young, eclectic hipsters—the Flea can provide something for just about everyone.
As the most successful vendors move on to establish storefront locations, their slots will open up, paving the way for new entrepreneurs to test their ideas in this unconventional urban setting.
BY Amanda Maher on December 12th, 2012
Do Industry Partnerships Hold the Key to Filling Workforce Gaps?
As baby boomers begin to retire, attrition in workforce expertise poses a threat to America’s economy. Already, employers complain of a lack of highly skilled, highly trained employees to fill open positions.
Yesterday, McKinsey released a report “Education to Employment: Designing a System that Works.” To coincide with the release, McKinsey hosted a webinar in which panelists analyzed the disconnect between employers, prospective employees and educational programs. When asked “Are graduates ready for the workforce?,” fewer than 50% of employers and youth answered “yes,” while over 70% of education providers said “yes.” Mona Mourshed, who presented the study’s findings, said this highlights that employers, education providers and youth are living in parallel universes.
What is the solution? After studying countries around the world, McKinsey found that innovative and effective workforce development programs have important elements in common. Namely, education providers and employers actively step in to one another’s worlds on a regular basis.
Typically, this requires that firms work with educational providers to identify the skills needed to be hired. But other effective programs include employers acting as the educational providers. McKinsey research found that the most effective programs included classes at the job site, or a curriculum that is at least 50% practicum.
This hands-on learning is exemplified through industry-specific workforce development programs.
Apprenticeship 2000 is one industry collaboration that’s helping place students in high-tech jobs in North Carolina. The 4-year technical training program recruits high-performing juniors and seniors from local high schools for careers in plastics, electronics and machine technology, welding and tool and die making. Upon completion of the program, students earn an Associate’s Degree in Manufacturing Technology, an Apprentice Certificate from the NC Dept. of Labor, and are guaranteed a job after graduation earning at least $34,000 per year. So far, 116 students have graduated from Apprenticeship 2000, and another 49 are currently enrolled in training.
The origins of the program date back to 1995 when the Austrian manufacturing company Blum was unable to find skilled workers. Blum worked with seven other local manufacturing firms to design an industry partnership for training workers.
One of the participating companies is Siemens Corporation. President and CEO, Eric Spiegel, explained during yesterday’s webinar that when Siemens was looking to build a new gas turbine plant in Charlotte that would create 800 new jobs, they couldn’t find workers with the requisite system engineering and electronics skills. As a result, they entered the Apprenticeship 2000 program. Using its apprenticeship program in Germany as a model, Siemens has worked with local community colleges to develop a curriculum that addresses the lack of high-skilled workers in the Charlotte area.
Programs like Apprenticeship 2000 help industry share the costs of improving education. By collectively addressing the talent issue for the entire sector, it reduces concerns of cost-effectiveness and poaching of trained employees.
For these types of programs to be successful, data is key. Apprenticeship 2000 would not have come to fruition if companies in the Charlotte area did not realize they had the same hiring needs. It is important to create vehicles for discussion, such as business roundtables, that bring stakeholders together to address employment needs. When all stakeholders come together, it becomes obvious that the investment in workforce development is worth making, explained Speigel.
Tomorrow, ICIC is hosting its own webinar on industry-specific workforce development programs. Using SFMade’s “Hiring Made Better” case study as the focal point for conversation, we will learn how manufacturing companies are coming together to promote workforce training in the Bay Area – and the lessons that can be applied in your own community. Register here for tomorrow’s webinar.
We’re looking for additional examples of sectoral approaches to workforce development. What is your community doing? How does your business work with its industry peers to train skilled workers? Share your stories with us and we’ll profile the case studies in our “What Works: Spotlight on Solutions” newsletters.
BY Amanda Maher on December 11th, 2012
The Rise of Specialized MBA Programs and How They Will Benefit the World at Large
As ICIC has highlighted before, there are a number of benefits to a specialized and carefully trained workforce -- and in many cases, capitalizing on expertise is one of the best ways to actually grow businesses. In the article that follows, education analyst Emma Collins looks at ways in which business schools around the country are responding to this need through the creation of specialized MBA programs. More of Ms. Collins’ work, most of which deals with higher education in the Internet space, can be found here.
Guest Blog by Emma Collins
Getting a business degree is something that has long been viewed as a sort of “gold standard” for corporate success, though the MBA scene has been undergoing a slow change in recent years. More and more institutions are offering so-called “specialized” or “niche” degree programs that promise to train students in nuanced areas of business administration, in subjects as varied as winery management, church leadership, and energy policy. Most of these programs are offered through smaller, lesser-known institutions, but many graduates are finding them invaluable for breaking into specific fields. The growth of this sort of specialized curriculum has the potential to reshape business education going forward.
According to The New York Times, students have been flocking to specialized MBA programs in numbers that have increased by about a 4 percent margin each year since 2001. “Investing as much as $30,000 in such a narrowly focused degree may be risky—especially if the market for a particular job dries up suddenly (the tightening of the real estate industry is a good example)—but going deep instead of wide seems to fit right in with an increasingly segmented world,” the Times said.
There are two main reasons why the specialized MBA market is thriving today: (1) the growth and saturation of broader MBA programs; and (2) the still-stalled job market. More schools than ever before offer business degree programs, most of which center on generalized ideas of finance, corporate structure, and basic management tenets. At the top schools, these degrees usually translate into prestigious careers with major corporations. This is not always true for graduates of lesser-ranked schools, however. An MBA was once a mark of privilege; today, there are hundreds of institutions peddling the program, sometimes entirely online. The field is unquestionably diluted, which has many wondering whether the investment is worth it if not at a top, “known quantity” school—particularly in narrowing market where there are simply fewer jobs, even for those with expertise.
The specialized MBA is one way that smaller schools and less prestigious institutions have sought to revitalize their business programs. Rather than simply selling a comparable degree, they have repackaged their courses to appeal to people interested in preparing for careers in discrete sectors. As such, they are able to differentiate themselves from the top-tier schools all the while providing something that could not necessarily be achieved in a broader, more corporation-centered program.
Washington State University, for instance, offers a specific wine business management program that helps students learn the ins and outs of running, managing, and starting up a winery. Someone with viticulture expertise or interest may be drawn to this degree as a way of honing skills and preparing a resume for work in this uniquely demanding field. Getting a broad MBA from a stalwart school like Harvard or the University of Pennsylvania may not be the best bet for this sort of student, as it would still leave her needing knowledge of the wine industry specifically.
The same is true for the Master of Arts in ministry/MBA joint program offered at Boston College. This combined degree is designed to prepare students for a life serving in church administration, and is something of an all-in-one program for people interested in working in religious institutions. A student who knows that he wants to pursue business education specifically to work in a church or religious school might be money—and time—ahead by pursuing this program rather than studying major corporations and large-scale business ethics, as is often inevitable in more mainstream MBAs.
The University of Wisconsin offers perhaps the broadest range of specialized MBAs, ranging from arts administration and marketing research to supply chain management and applied security analysis. Many of the top business school programs have responded to this trend by offering specializations of their own, perhaps in an attempt to woo high-achieving students who are being drawn to smaller schools because of the more tailored curricula. Real estate, sports management, biosciences and healthcare-focused MBAs are currently offered at schools like the University of California-Berkeley and the Massachusetts Institute of Technology. The real driver of this trend continues to be second-tier schools, though—and businesses are benefiting from the newfound expertise of these graduates.
It remains true that not a lot of new jobs are being created in the business sector, particularly not for those with broad management training. A specialized degree combined with an entrepreneurial spirit often leads to more success, though.
“Whether specialized programs allow students to write their own ticket isn't clear, and they are not the right choice for every student,” Bloomberg Businessweek said in an article evaluating the relative benefits of the niche MBA phenomenon. “But many self-starters have used specialized programs to create their own path,” the article said. “Students with a clear focus who are comfortable charting their own course may be the best candidates for specialized MBA programs.”
Small business owners looking to go back to school are often well suited for this sort of focused program, even if they have the credentials to get into a top-tier institution. As with so many things, though, a lot depends on motivation. If the end goals are increased earning potential and access to broad alumni networks, attending the best school possible no matter the programming is usually the best course. On the other hand, if what is needed is subject-matter expertise in order to improve a specific business, looking for a nuanced program is usually a better way to learn things that can be immediately implemented. Searching for the right business program is never easy, but the rise of the specialized genre adds more options and possibilities
BY Guest Blogger on December 10th, 2012
The Problem with "Best of" Cities Lists
Guest Blog by Alex Abboud
Over the past week, my hometown of Edmonton, Alberta, has been abuzz about the Quality of Life rankings released by Numbeo, which put Edmonton 3rd in the world, and provincial counterpart Calgary 5th. In a city where civic boosterism runs high, and a share of civic leadership (if not the general population) craves external recognition and ‘world-class’ status, this is like crack. There are level-headed exceptions, but if you’re plugged into the local social media scene, it’s been inescapable, despite the fact that nobody in Edmonton had probably heard of Numbeo two weeks ago (the Huffington Post story had been liked over 8,000 times as of posting this).
The problem with this, of course, is that these quality of life rankings are in a sense meaningless. Sharon Lerner wrote a good piece on this for Good last year, titled Why “Best Place to Live” Lists are Kind of the Worst. Key passage:
But the problem, or one of them, is that taste varies wildly. Another is that, because they attempt to incorporate an entire nation’s desires, these one-size-fits-all features tend to showcase a version of life as we’d like it to be, a version that glosses over the things that truly make a difference to most people: community, services, and policies that ease their daily life. Idealizing places means being ignorant of their inevitable flaws. Graduation rates and crime stats, on which many of these lists are based, are important to consider. But allowing them to define a place is like falling in love with someone’s online profile.
Now, before I’m accused of being critical of my hometown, I should note that I do believe Edmonton, in general, offers a high quality of life. So, however, does nearly every Canadian city. Yet, that doesn’t mean you can generalize and compare cities as apples to apples. To Lerner’s points, I’d add a few general problems:
Quality of Life Indicators Can Vary Throughout a City
Indicators such as pollution and crime often come up on lists (as they do on Numbeo’s). They are also, however, rarely uniform. Pollution may be a bigger problem closer to any industry or major traffic points. On crime, any city has both problem and safe areas.
Traffic Times Are Deceiving
Really, so is every metric that takes an average. Traffic is a relative non-factor if you work at home, or if you have the means and ability to live within walking distance of work and major amenities. Further, different modes mean a longer commute isn’t the worst thing. Access to effective public transit can also make longer commute times more attractive than spending a few less minutes in bumper-to-bumper traffic.
People Have Different Interests and Circumstances
Many of the measurable aspects don’t apply equally to everyone. If you don’t have kids, you’re probably less concerned about the quality of schools. If you don’t run/bike/walk, access to trails probably isn’t a consideration. Depending on hobbies, you may either love or hate a long winter, such as that in Edmonton, where snow can cover the ground for 5-6 months. If you like sailing, a landlocked city is not for you.
Someone’s experience of a place will depend on availability of jobs in their field, relevant volunteer/recreational activities, and proximity of family and friends. A University of Alberta grad who is an avid skier and has family roots in Alberta might feel right at home in Edmonton. A person born and raised in the Lower Mainland who enjoys watersports and mild weather might not so much.
On What Makes a City “Best”
Lists can be useful for measuring many things about cities, but quality of life varies too much from individual to individual to sum up as a generalization. Cities are good and bad for different people. A person would be best served to find a good fit, and work on making it better, no matter what any list says.
BY Guest Blogger on December 7th, 2012
A Sense of ‘Place’ Matters to Akron
During all the political conversation of recent months, Americans heard precious little on the national stage about the vitality of our cities. Yet our cities are key to future prosperity and job creation due in large part to the proximity of local economic anchors within their boundaries. These are the places where people live, work and learn and where the art of placemaking will be at the center of building competitive advantages.
Placemaking is the ability to identify the unique assets of a community to create and develop strategies and outcomes around quality of life and economic sustainability that best connect people with their place. As such, all community and economic activity must be grounded somewhere in the community that is connected to its greatest assets, not disconnected.
In Akron, the benefits of visionary planning by local leaders such as Mayor Don Plusquellic and University of Akron President Luis Proenza are visible in significant stretches of new investment in Akron. Visit the Akron area if you haven’t recently. Look around and see the progress for yourself. What you’ll witness is a solid foundation emerging for future prosperity.
Urban planners across the country envy what is already in place in Akron. Where other communities are stifled by the difficulty of coordinating community leaders toward a common vision, Akron’s leaders have mobilized for years. And today, work toward developing a vibrant urban core is emerging in a compact area around Main Street and circling around the University of Akron and the main campuses of three local hospitals.
Akron’s emerging urban core has benefited in recent decades from nearly $2 billion of investment in projects and infrastructure, mainly by the city of Akron, The University of Akron, Summa Health System, Akron Public Schools and Akron Children’s Hospital. Minus such investment, the canvas for building a strong urban setting would be blank.
University Park Alliance has focused the past two years on strategies that build on this investment to create an urban core with vitality and civic activity. In 2013, our efforts will continue toward fulfilling the promise of a livable urban neighborhood. The work at UPA is about becoming a market leader in creating a great “place” to spur community and economic opportunity that grow organically, having a long-term impact on the soul of the Akron community.
UPA, in effect, is attempting to implement a business plan based on a two parallel tracks of transforming real estate projects and enhanced community civic engagement to create a new urban landscape, supported by established business, educational and entrepreneurial strengths. At UPA, our role is to catalyze new development through collaboration, while creating a vibrant community of engaged citizens who are partners in the revitalization effort.
Even in a global economy, everything is local, as all community and economic activity must be grounded somewhere. In great cities, people enjoy a high quality of life when assets are connected closely. It’s the idea of cultural amenities within walking distance, and in turn, close to restaurants housing and shopping. The density creates cohesion and vitality, and, according to economic trends, it also plays a vital role in talent attraction, investment, economic growth and job creation.
With support from the John S. and James L. Knight Foundation, UPA, as a nonprofit community development corporation, is pursuing transforming projects to enhance the ambience and livability of the University Park area.
Beyond bricks-and-mortar, UPA is equally concerned about nurturing the soul of the community, through the support of activities that bring people together to advance the development of social capital and civic life.
That’s why we promote arts festivals, community gardens, civic forums and the like. As a result of one such effort, a high priority for 2013 is the development of a Special Improvement District as a means to further enhance the work at UPA and the neighborhoods.
The timing of our community’s progress could not be more opportune, as globally competitive cities work to establish a sense of “place.” As an example, think of the current allure of Minneapolis-St. Paul. It’s certainly not the weather that attracts people. Rather, it’s the place itself, as shaped by local leaders with visionary planning, that creates market advantage.
In Akron, the investment of our leaders, the new projects UPA is pursuing and the community engagement we are fostering are a formidable combination to create a great urban lifestyle. “Place” is about convenience, amenities close at hand, economies of scale and busy streets. It’s also about the soul of the community, expressed through enriching programs and activities and opportunities for public discourse that bring neighbors together to advance civic life.
Akron’s story illustrates how real possibilities for 21st century competitiveness can emerge from local leadership, self-examination and a community’s can-do spirit.
Sometimes it’s easy to miss the treasures in our own backyard. We hope UPA and Akron’s resilient story will inspire people who live here and also those in other aging cities seeking their own road maps to a new future.
To learn more about the University Park Alliance, visit www.upakron.com
BY Guest Blogger on December 5th, 2012
Financing Growth Clusters in Southeast Louisiana
(avg: 5.00 of 5)
ICIC recently released a study, "Economic Investment Opportunity of Southeast Louisiana." The purpose was to analyze priorities of Southeast Louisiana and assess how well the region's capital markets align with the area's economic development priorities. The report makes recommendations to Seedco Financial-Louisiana as to how it can strategically lend and bridge gaps that hinder the region's growth and cluster development.
The study identified the clusters with the greatest potential to facilitate equitable growth in the region. Clusters were categorized according to performance and inclusiveness, thus helping lenders focus their investment around specific priorities.
Here are two takeaways from the report that are relevant for your city:
- By developing new products and targeting investment in a way that helps address cluster-specific gaps, lenders and investors operating in the region can more effectively support economic development priorities, including job and wealth creation, and simultaneously enhance investment returns.
- While gaps and priorities will change over time, it is important to develop a process for ensuring that investment decisions are informed by economic development priorities, as well as by on-the-ground experiences of firms and other stakeholders.
The entire report can be found here.
BY Amanda Maher on December 4th, 2012
Startups and Government, The Next Frontier
American innovation has historically been funded almost entirely by the federal government, primarily to aid the military in keeping our citizens safe. Why is your GPS system so accurate? Because it’s undergirded by technology that was developed to beat the Russians to the moon during the Space Race- a sophisticated set of satellites rove continually around the earth, sending back signals wirelessly to your Toyota.
Sometime in the mid-1990s however, with the advent of the internet (another technology powered by federal investment), the cutting edge of technology became dispersed rather than centralized. Scruffy undergraduates in garages and private university labs alike became key drivers of technological change, creating new vocabularies (Googled anything lately?) and helping to overthrow dictators (smartphone-led) in unforeseen ways. In recognition of this fact, the US SBA held a webinar last week entitled “Startups and Government” to talk about 2 promising initiatives to help small businesses get access to government contracts and create value: RFP-EZ and Data.gov.
The political conversation around the country over the last 6 months has consistently sounded the alarm about the need to rein in out-of-control federal spending in the coming years. An interesting dimension of cutting spending is that much of it is somebody’s income, whether through contractors to build the nation’s infrastructure or in-kind Medicare outlays for our seniors. Clay Johnson, a Presidential Innovation Fellow at the SBA, described RFP-EZ as an initiative to build a platform that makes it easier for professional service and technology small businesses to navigate federal government contracts. In an additional bonus, more efficient solutions to federal needs could save taxpayers millions or even billions of dollars as the government begins to bridge the gap between the Beltway and Palo Alto. Finally, new ventures may, for the first time, get access to a giant new buyer for their products. To put the program in perspective, RFP-EZ could potentially open up over $200 billion per year to help small businesses scale. Not only is the federal government looking to open up its pocket book, but also vast stores of information it collects on virtually everything.
Dmitry Kachaev, another Presidential Innovation Fellow tasked with the monumental goal of opening up government data to the masses in a scalable, usable way, made a presentation and took questions about Data.gov. With data contributed from the UN, the Worldbank, and over 180 agencies affiliated with the US government, the initiative aspires to increase the ability of the public to find, download, and use datasets that are generated and held by the federal government. While it doesn’t sound so world-beating at first glance, the program has the potential not just to help established companies, but to create markets that could not have previously existed. For example, Kachaev spoke of businesses looking up their real-time energy usage and then using apps created by both public and private sector companies to manage their consumption. Does it sound too futuristic to be relevant and too innovative to be executed by the government? The future has arrived and these apps are already available and being created at sites like http://energy.data.gov/. Beyond energy, the raw data already available spans from global earthquake tracking over the last week to U.S. Overseas Loans and Grants since 1946- in short, the project supplies a treasure trove of information to create powerful new companies and strengthen participatory democracy.
Summing It Up
ICIC, since its inception, has realized that public-private partnerships have the potential to enact substantial change. We live this creed as evidenced by our recent strategic alliance with Next Street, the nation’s premiere merchant bank for urban businesses. The American government, in the best tradition of helping people help themselves, is taking steps to transform the way it interacts with private actors and the country at large through these initiatives. If you’re a scrappy small business looking for a large buyer or a serial entrepreneur looking to conquer the world in an afternoon, the news is in: the federal government’s open for business.
BY Sathya Vijayakumar on December 3rd, 2012
The 10 Least Employed Cities
With national unemployment at 7.9%, policymakers and economic development practitioners have been searching for ways to boost job growth and put Americans back to work. Some policies have been incredibly successful (see what NYC is doing with their Workforce1 Centers). Other policies less so. One thing is clear: there’s no silver bullet to job creation.
UBM Future Cities released a report today looking at unemployment rates in cities nationwide. According to the authors, “Reasons for urban joblessness vary: An industry fails or becomes outdated; companies suffer budget cuts; regions are abandoned by business in favor of greener, foreign pastures.”
The new study highlights the ten cities with the highest unemployment rates. The report analyzes cities with populations over 500,000 and used a combination of US Census Bureau and US Bureau of Labor Statistics data to put together the list. In each of the ten cities, unemployment is higher than 8%. In some cities, unemployment is greater than 10%.
The ten cities, ranked in order (10 to 1, Detroit having highest unemployment), are:
- Charlotte, NC
- Washington, DC
- San Jose, CA
- New York, NY
- Chicago, IL
- Memphis, TN
- Baltimore, MD
- Philadelphia, PA
- Los Angeles, CA
- Detroit, MI
Some of these cities (Detroit, Memphis, Baltimore) are not a surprise; their struggles have been the focus of national media attention, foundations and economic development leaders for years now. More surprising are the cities like New York, San Jose and Washington, DC that are often touted as drivers of the national economy.
So what gives?
In Washington, D.C, jobs are tied to the federal government. As the economy weakened, contracts with the federal government were cut and departments became smaller, meaning fewer jobs. As the economy improves and federal spending increases, we should expect the unemployment rate in the District of Columbia to decrease.
San Jose’s unemployment rate is 8.8%. Apparently, jobs in the technology industry haven’t trickled down to support lower levels of the economy. We tend to think of Silicon Valley as having one of the nation’s most robust economies; and while this is true for the tech sector, not everyone in the Bay Area is employed in this industry—and those are the folks who find themselves out of work.
In New York City, unemployed and underemployed workers are finding work – thanks (but not really) to Superstorm Sandy. But these positions are temporary and will not improve the broader economy. “New York, like some other major cities, is adding jobs mostly in the highest- and lowest-paid sections of the market. The high paid work requires special skills, and positions are limited. The low-paying work is more plentiful, but it represents a step down for unemployed middle-class workers,” writes UBM Future Cities.
The report also highlights some of the programs that cities are putting in place to help boost employment. It gives credit when due—for instance, despite having the nation’s highest unemployment rate, Detroit showed the highest wage growth in the second quarter of 2012. This is very good news for Motor City residents.
The full report can be found here.
Share your experience with us: what do you think are some of the most effective strategies for decreasing unemployment and helping residents secure well-paying jobs?
BY Amanda Maher on November 29th, 2012
What Concerns Small Businesses about 2013? Inner City 100 CEOs Respond
Wondering what the small business climate will look like in 2013? Small business owners, especially, are unsure of what to expect when there are so many unanswered questions concerning both the global and domestic economy such as:
- What will the regulatory climate look like with the implementation of the Affordable Care Act?
- What will be the highest marginal tax rate?
- Will there be entitlement reform and how will it be structured?
- Will we see an increase in interest rates?
- How likely is a default in Greece or any other member of the EU?
- Will a continued slowdown in Chinese GDP put a halt to any kind of economic recovery in the US?
At this point, most believe that the answers to these types of questions are largely in limbo. In an effort to get some kind of idea as to where the economy is headed and where entrepreneurs are most concerned, I decided to look for some anecdotal clues from some incredible value and job creators: Inner City 100 winners. Over the course of fourteen years, Inner City 100 winners employ over 103,000 people (40% of which are inner city residents) while creating nearly 73,000 new jobs and growing at an average year-over-year rate of roughly 50%. I figured that asking members of a group that has shown incredible success over a long period of time might give us some clues as to how they are managing these uncertain economic times.
Jennifer Pinck of Pinck and Company, a local architectural firm noted that the upcoming "fiscal cliff" has her concerned. She said, "I'd like to think that Congress will address tax reform and be sensitive to the realities of small business owners. On paper, those of use who are SubChapter S corporations, we may make more than $250,000 per year according to the IRS and pay taxes on these amounts but in reality - we leave our money in the business. I'd like to see a carve out for this fiscal reality - that is the chief way I make sure I keep enough cash on hand to pay staff and keep the doors open."
Bruce Blue of Freedom Metals, a Louisville-based scrap metal recycling company, has guarded optimism over what is on the horizon for small businesses. "We see business getting a little stronger first half next year. Export of scrap seems to be holding especially in the non ferrous sector. Steel mills are buying only what they need, so we are trying to keep our inventory turning every 30 days. If Congress does not get a working agreement before January, I am not sure what will happen, but it cannot be good. Also, Europe could also be a problem with the unemployment problem. China is still buying and our business is very dependent on how China purchases scrap."
Jose Villa, CEO of multicultural advertising agency Sensis, feels similarly, "I think 2013 will bring slow, but continued growth in the economy, assuming some uncertainties (mostly related to government policy in the U.S. and in Europe) become certain. The improvement in the overall economy should provide a positive environment for small businesses to grow. The big wildcard is technology and the rapid pace of change that will continue to disrupt established business models and create new ones."
Patti Winstanley of Aztec Promotional Group, an Austin-based promotional products company, saw opportunities for her firm to grow in 2013, "Although we are cautious about how taxes and healthcare will affect our business, 2013 should bring more opportunities for growth. We have expanded our product lines for items that we print in house, which allows us to offer greater controls and flexibility for our customers."
Steven Pinsky of Babette, an Oakland manufacturer and retailer of women's clothing, is hoping to see some leadership and effective compromise from our political leaders that will help the business community. "What we are looking forward to in the coming year is the return of sanity to our congressional leaders. Posturing by the left and the right has done nothing to fix our economic woes. Our biggest problem as a small business is consumer confidence. Until the government figures out how to work together to move us forward I don't see any material changes."
So there you have it. CEOs of fast-growing firms can see potential success and growth for 2013. They do, however, have large and, so far, unanswered concerns over domestic outlook in the US as well as in Europe and China. As 2013 unfolds, we hope that our leaders will listen to their voices as we face many steep challenges in bringing our economy back up to speed.
BY Alex Rodriguez on November 28th, 2012
What impact will the fiscal cliff have on America’s poor?
(avg: 3.33 of 5)
With Thanksgiving behind us and no budget resolution in sight, falling off the "fiscal cliff" is becoming more of a reality. The impact could be huge, especially on America's poorest residents.
To begin, it’s important to understand what the fiscal cliff is and how we got here. The “fiscal cliff” is a combination of huge tax increases and service cuts that are set to kick in on January 1, 2013. The Bush tax cuts, Obama payroll tax cuts and long-term unemployment insurance will all expire at this time.
President Obama formed a Congressional committee earlier this year to explore ways to preserve the tax cuts. To do so, the committee had to find a way to cut $1.5 trillion from the budget elsewhere. The committee was unable to find a resolution, and as such, we face $1 trillion in immediate tax cuts at the beginning of the New Year.
Wealthier Americans will face the steepest increase in taxes (5.8 percent); taxes for the bottom 20% of Americans will only increase 3.7 percent. However, the net share of income spent on taxes will have a greater impact on poor Americans. According to an article in The Nation, the bottom 20% of Americans will see their after-tax income reduced by nearly 2% while the top 40% of Americans’ after-tax income will be reduced by only 0.1%.
Moreover, discretionary spending cuts will result in less funding for services like transportation, education, and children’s health. The expanded Child Tax Credit and Earned Income Tax Credit, aimed at lower and moderate-income families, are set to expire as well. A $58 billion cut in long-term unemployment insurance will result in two million workers losing unemployment insurance if we fall off the fiscal cliff. Another one million would lose their benefits at the end of Q1 2013. Combine this with projected layoffs and the nation’s current 7.9% unemployment rate could rise to 9.1%, according to some analysts.
Of course, the service cuts and tax increases will decrease the amount of disposable income American’s have—almost assuring we fall back in to a deep recession. As shown in the graph below, the bottom 20% and the top 0.1% will experience the greatest impact on disposable income: the former close to 8% and the latter just over 7%. The difference is the top 0.1% can still survive (very comfortably) with less disposable income; the poor cannot.
Here's to hoping the tryptophan wears off and both parties can work on thwarting this looming crisis.
BY Amanda Maher on November 27th, 2012
Are You Shopping Small On Saturday?
SBA Administratior Karen Mills talks about Small Business Saturday on MSNBC's Your Business
Small Business Saturday, Between Black Friday and Cyber Monday is a day dedicated to supporting small business retailers during one of the busiest shopping weekends of the year. Last year, over one hundred million people came together to “shop small” at their local small businesses. Founding partner American Express, along with the U.S. Small Business Administration (SBA) and other partners offer free services to business owners in order to help them take full advantage of the event.
Half of the people who work in this country own or work for a small business, according to the SBA. In addition, retail firms comprise about 14% of all inner city small business establishments and are projected to grow their share substantially over the next decade. Employing nearly 600,000 workers, urban small business retailers are pivotal sources of income and livelihoods for inner city residents across the nation. Help grow the country’s economy this holiday season by participating in Small Business Saturday. Below are SBA-offered tips for how to participate:
- Find participating small businesses in your area
For small business owners
Get advice on how to prepare for the holiday season on the SBA Small Business Matters blog:
- 6 Ways to Maximize Your Return on Sponsoring or Hosting Holiday Events
- 7 Holiday Marketing Tips on a Limited Budget
- 5 Things to Know Now About Hiring Temporary Workers for the 2012 Holiday Season
- Get free Small Business Saturday® marketing materials - including sample posters, press releases, and social media updates
- Join Small Business Saturday® on Facebook and spread the word on other social media
BY Mary Duggan on November 21st, 2012
NOTEBOOK: Lending up, but still needs hand
ICIC’s Inner City Capital Connections program held its Capital Training Day for the second time in Detroit this past October. Urban entrepreneurs seeking growth capital gathered in the Madison Building for a day of financial workshops and advisory sessions. The day’s content was led by debt and equity providers to help prepare the entrepreneurs to pitch for capital. Sessions offered guidance on how to work with debt and equity providers, how to develop a strategy for increased capacity, and how to appeal to investors. The capital training has proven effective as; program participants have gone on to raise $703 million in capital.
Crain’s Detroit Business recently interviewed participants from the Detroit training about the lending landscape in Detroit. Respondents agreed that lending is up, but diligent preparation by small business owners is a must.
Originally Published in Crain's Detroit Business
November 18, 2012
By Gary Anglebrandt
Now that downtown Detroit and nearby areas are filling up with residents, and the hip thing for local businesses to do is announce a move into the heart of the city, one might expect that money is opening up to people who want to start or grow businesses.
A perfect place to find out was the Inner City Capital Connections seminar held by the Boston-based Initiative for a Competitive Inner City at the Madison Building in late October. The group holds the seminars to bring investors and lenders into the same room as small-businesspeople for a day of financial education.
Lending from traditional banks has picked up compared to 2009, said Karl Bell, senior vice president of Invest Detroit, who sees more opportunities for retailers as density in the downtown area increases.
"It's starting to open up," Bell said.
But times are still tough, said Christine Coady Narayanan, president and CEO of the Lansing-based nonprofit Opportunity Resource Fund, which does most of its lending in Detroit.
"It's still a tight credit market in the small-business arena," she said. Startups and existing small businesses still rely on alternative funders like hers to fill gaps in meeting banks' lending requirements, she said.
Marshall Kleven, a Bank of America senior vice president who works out of the company's Livonia office, said third-party lenders are still necessary for many loans to be approved by traditional lenders like BOA. But the increasing density in downtown is encouraging, he said.
"Anytime we see an aggregation of people in an area, the opportunity increases for lending," Kleven said.
Phillip Cifuentes, co-owner of Detroit-based Omaha Automation Inc., said although the automotive industry has bounced back, he still finds it hard to find interested lenders, no matter how high his purchase orders grow.
"Nobody wants to give any money to anybody in Detroit," he said.
Hyacinth Vassell, manager of Inner City Capital Connections, said her organization does biannual surveys of the companies it works with, and lending is improving among those businesses. But small-business owners have had to be more diligent about getting their hands on loans, by doing things such as having more meetings with their bankers and attending seminars like the one at the Madison. One person even brought a banker to the seminar, she said.
Demonstrating strategic, financial and marketing specifics is more important than ever, she said.
"A bank's not going to sign up on passion," Vassell said.
BY Guest Blogger on November 20th, 2012
Working Capital Helps NYC Small Businesses Get Back On Their Feet
Photo courtesy of the Huffington Post
As we all know after weeks of heart-wrenching news footage from New York City, small businesses were hit hard by hurricane Sandy. Mass electricity outages that lasted for days, ruined equipment, and damaged merchandise were compounded by a Nor’easter that recently brought the area the season’s first snowfall.
ICIC witnessed this small business hardship first hand when we traveled to New York City on November 9th for the annual Inner City Capital Connections (ICCC) National Match Day. The pain that businesses felt was palpable, with many reporting that, 10 days after landfall, their power had still not come back – some businesses had to reconsider their attendance altogether. Struggles of course weren’t limited to ICCC companies; as the following passage from “Hurricane Sandy Slams Small Business” suggests, many people’s professional and personal lives are deeply intertwined and the total economic consequences are estimated to be vast:
"Losing my business means losing my house, said Yuyama. "It means losing everything." He said he's not yet sure what insurance will cover, if anything.
One disaster modeling company forecast the insured losses from Sandy at up to $20 billion and the economic damages at up to $50 billion, with almost two-thirds of those losses in New York and New Jersey.
On top of that, FEMA is expected to face up to 80,000 flood insurance claims from Sandy. Assuming those claims cost about as much as they did last year for Hurricane Irene, that would represent roughly $2.4 billion in additional losses.
Small businesses continue to rehabilitate themselves from the storm with the help of public and private actors from across the country. In addition to the $5 million that Goldman Sachs has already donated to Hurricane Sandy cleanup and recovery efforts, the investment firm recently announced the creation of a $10 million Emergency Loan Fund in partnership with the NYC Department of Small Business Services and the NYC Economic Development Corporation.
Companies and nonprofits located in New York City that experienced damage as a result of Hurricane Sandy and have less than 100 employees qualify for capital administered through the New York Business Development Corporation. The loans are between $5,000 and $25,000, with no payments required for the first 6 months as businesses continue to get back on their feet. The funds are expected to flow to borrowers on an expedited basis, five to seven days after application. End loans will help small businesses with working capital, repairs and business interruption, among other things.
With an estimated economic loss second only to Hurricane Katrina in the annals of natural disaster, these capital investments are vital to helping the city recover. In the midst of a difficult economic environment, a devastating storm, and a divided body politic, the loan fund and other efforts to head off the worst of the storm’s aftermath serve as refreshing examples of the country coming together in the face of strife and turmoil.
BY Sathya Vijayakumar on November 15th, 2012
Increasing Impact: Industry-Specific Workforce Development Strategies
Through the years, ICIC research has identified industry clusters that are ripe for inner city business growth and job creation. But increasingly, employers are having difficulty filling job openings in these growing industries. Place-based workforce development efforts are giving way to more specific, sector-based workforce strategies. By matching workers’ skills to the needs of growth industries within a region, cities are amplifying impact and driving local economic stability.
For our next What Works webinar, Janet Lees will discuss SFMade’s Hiring Made Better program. Through this initiative, SFMade connects low-income workers to job opportunities with San Francisco-based manufacturing firms. In under two years, over 325 local businesses have been involved with Hiring Made Better, 52 businesses have received hiring consultations and 47 low-income individuals with barriers to employment have been hired by local manufacturers.
In this webinar, you will learn:
Reasons why industry-specific workforce development strategies can have a bigger impact on both local businesses and residents
How the Hiring Made Betterprogram was created and what obstacles needed to be overcome to achieve the results to date
Strategies for implementing industry-specific workforce development initiatives in your own community
Case Study featured: SFMade’s Hiring Made Better
Presentation by: Janet Lees, Senior Director, SFMade
The presentation will be followed with a 30-45 minute Q&A period.
Who should attend? Economic development practitioners, foundations, thought leaders and urban enthusiasts interested in promoting urban economic development through the use / reuse of industrial assets
Date: Wednesday, December 12, 2012
Time: 2:00 PM - 3:30 p.m. EST
BY Amanda Maher on November 14th, 2012
Small Business Advice to the President
Now that the election is over and the dust has settled, it’s time to get down to business. Small business—that is.
The economy and job creation was one of the hottest topics of the 2012 Presidential Election. Clearly, Americans are still worried about the sluggish economy. Business owners and residents alike are worried about the U.S. falling off the “fiscal cliff.”
With a second term solidified, how should the President respond?
Yesterday, USA Today proposed 8 ways for the President to support small businesses—the drivers of the U.S. economy. The author put some great ideas forward, including:
- Help one-person businesses hire their first non-family employee. There are approximately 22 million nonemployer businesses in the U.S.; even if 1% were given incentives to hire this would create 200,000 new jobs. A 25% tax credit might be one way to help businesses hire that first employee.
- Separate the Small Business Administration from other agencies. There has been much ado about combining the SBA in to a single department with other agencies, but small businesses have distinctive needs and should have their own advocate and programs.
- Rethink the definition of "small" business. In the President's last term, he changed the definition of "small business" to sometiems include firms with over 1,000 employees. There are often set-asides to help small businesses access certain goverment contracts, loans and grants--but actual small businesses have a hard time competing with larger firms to access these. Restricting who qualifies as a small business would benefit smaller firms.
- Address health care—again. Whether for or against Affordable Health Care Act (aka “Obamacare”), it’s hard to ignore that many small businesses have difficulty affording health care benefits. As Obamacare moves forward, the President should take a hard line to ensure that small business’ insurance choices are both high-quality and affordable. Business owners and employees will all benefit.
To read the entire article, click here.
Are you a small business owner? What steps do you think the President should take in the coming years to support the needs of small businesses?
BY Amanda Maher on November 13th, 2012
Finding Financing for Jobs and Growth
Today, more than 100 growing inner city companies from around the country are in New York City pitching to investors for growth capital. These investment-ready companies have been chosen from over 5,200 nominations because of their strong growth potential and their commitment to the inner city. At the annual Inner City Capital Connections (ICCC) National Match Day, the companies will connect with and receive feedback from investors through on-on-one ‘speed pitching’ sessions.
The goal of the match day is to connect urban entrepreneurs with the capital they need to grow and ultimately create jobs in their communities. According to ICIC research, 71% of inner city businesses operate, on average, with only ¼ of the capital they need.
ICIC partners with Bank of America, FORTUNE and the U.S. Small Business Administration (SBA) on the ICCC program to help close that capital gap.
Since the program’s inception in 2005, over $703 million in capital has been raised - $532 million in debt and $171 million in equity. Many of the participating small businesses have earned repeat rounds of funding or return to the program to access the next stage of growth capital. Of this year’s 178 participating businesses, many are returning to either make a new deal or a new investor connection.
Link Howard, CEO of Detroit-based Powerlink is one of those returning business owners.
By the time Link Howard came to ICCC, he’d already managed a number of difficult transitions. He’d left the military and built a civilian career as vice president of an auto supplier. As an entrepreneur, he moved his company away from temporary staffing into facilities management. And in 2004, when he saw that the auto industry was slipping, he looked for clients in healthcare. Six years later, about 30% of Powerlink’s revenues came from healthcare companies, and another 50% came from school systems. The remainder was split between industrial and utility companies, and Powerlink had become a $10 million company.
Despite such success, Powerlink was greatly undercapitalized. It had only a
$150,000 line of credit and was using factoring to finance contracts. Howard had been trying to build a relationship with a new banker for more than a year but hadn’t raised the capital he needed. ICCC, he says, “helped us understand the areas of weakness in our presentation and how we should be presenting to the financial community. We really learned about what investors wanted to hear from us. They wanted to see what made us unique, how we’re going to make money for them and how our business model is sound.”
Howard put renewed emphasis on his company’s financial reporting and, using the feedback he received at ICCC, persuaded a new bank to provide a $2.5 million line of credit. That was exactly what Powerlink needed to finance a big contract with the Detroit Public Schools.
By winning that contract, Howard created 243 jobs with a median salary of more than $45,000. Powerlink expects to bring in $23 to $24 million in sales this year, and Howard sees more growth ahead—both for Powerlink and for Detroit. He knows it won’t be easy, referring to business in the city as “survival of the fittest under the most difficult circumstances.” But he also has great faith in the ability of the city’s entrepreneurs to turn things around. Says Howard, “I really believe that Detroit is on the brink of becoming a renaissance city.”
To learn more about the impact of the ICCC program or read growth stories like that of Powerlink, download the 2012 ICCC Impact Report.
BY Mary Duggan on November 9th, 2012
Our Agenda Is Urgent, And We Need More Partners
“We are at a time where the U.S. is facing unusual challenges and the need for us, particularly in the private sector, to step up and get engaged in this issue is greater than any time in my professional career.” – Dr. Michael Porter
This was the preamble to Dr. Michael Porter’s call to action at last week’s Strengthening Competitiveness Through Small Business Growth panel discussion in Chicago. ICIC hosted this panel in partnership with Goldman Sachs 10,000 Small Businesses. In front of 80 Chicago economic development, business, academia and government leaders, Dr. Porter advocated for aligned efforts to strengthen America’s business environment.
Dr. Porter cited findings from the U.S. Competitiveness Project to support the urgency for these efforts. The project that he and his colleagues at Harvard Business School have been working on over the last year and a half has revealed disturbing trends about the trajectory of business and economic competitiveness in America. Dr. Porter stated that job growth in the American economy has come to a screeching halt—and it stopped well before the recession. All of the jobs that have been created in the past 20 years have been in industries not subject to international competition, such as real estate and healthcare. Dr. Porter went on to say that America’s standard of living has not been improving and American wages have not been growing.
“We have to see this as a long-term challenge. We have to work together fundamentally to create a better environment for healthy business. If we don’t have healthy business, nothing else is going to work,” Dr. Porter explained. No community in America can be healthy without healthy businesses. Business is where wealth gets created; business is where most jobs are created; and business is what really drives economic prosperity. If business does well then the country will not only have a healthy economy, but will also have the resources available to address issues in society that could make the country stronger.
Dr. Porter stressed that in no place is there more work to be done than in America’s economically distressed communities. He stated that, “we’ve got to make this market system to work for those communities. That is what ICIC has been focused on for 20 years. But the agenda has never been more important.”
Dr. Porter challenged the attendees to get involved with ICIC’s agenda. He referenced existing partners, such as Goldman Sachs 10,000 Small Businesses. The panel included Bruce Heyman, Managing Director of Goldman Sachs Chicago, who spoke to how attendees could get involved with the small business program in Chicago. Deputy Mayor Steve Koch also participated on the panel speaking to the city’s small business development initiatives and echoing Dr. Porter’s standing invitation for attendees to get involved in any way they could.
ICIC has many partners across the country to further its mission, but we need more.
As we have learned, the competitiveness agenda is daunting. Both government, large, and small business have profound roles in building the country’s economic competitiveness. What role will you play?
BY Mary Duggan on November 8th, 2012
TAGS: small business | economic development | business | community development | shared value | ask the expert | competitivenss | u.s. competitiveness project | michael porter | goldman sachs | 10,000 small businesses
The Private Sector's Huge Response to Sandy Relief Efforts
Above: Specialty cans of water produced by Anheuser-Busch
Two major events have captivated the U.S. over the past 10 days. One is over, one is not.
Although the Presidential Election came to a close last night, Hurricane Sandy relief efforts must go on. Hundreds of thousands of residents in NY and NJ are still without power, countless people won’t be able to return to their homes until this winter, and the road to infrastructure recovery will be long.
But the private sector is stepping up in big ways. Here at ICIC we often tout “shared value” – which involves businesses “creating economic value in a way that also creates value for society by addressing its needs and challenges,” according to ICIC founder and Harvard Business School Professor Michael E. Porter.
In the wake of Hurricane Sandy, the actions of private sector companies might not exactly fall in to this stringent definition; only some of the companies will necessarily benefit from their acts of giving. However, the private sector response should not go unnoticed.
According to the U.S. Chamber, here are a few unique ways the private sector has stepped up:
- Anheuser-Busch closed down its bottling facilities to package 44,000 cases of emergency drinking water (1+ million cans) to distribute to residents impacted by the Hurricane. The AB Foundation is also donating $100,000 to the Red Cross to assist on-the-ground support for disaster relief workers and victims.
- Boar’s Head employees across the country produced thousands of sandwiches that the Red Cross then distributed in the most heavily impacted communities of NY and NJ. Boar’s Head also donated thousands of pounds of ham, turkey and chicken products to Feeding America, the nation’s largest hunger relief organization.
- Chrysler and General Motors both donated vehicles to assist in the relief efforts. Chrysler Group’s Ram Truck brand donated 20 Ram 1500 Tradesman trucks; GM donated 50 Chevy Silverado full-size pickup tricks and Express cargo vans to the Red Cross to assist with the recovery.
- Del Monte Foods donated 146 tons of canned fruits and vegetables, broth and a variety of Kibbles ‘n Bits and Meow Mix pet food to Feeding America and the ASPCA.
- Goldman Sachs Group is donating $5 million to Hurricane Sandy clean up and recovery efforts, and the firm will also provide $5 million in loans to small businesses impacted by the storm.
- Goya Foods donated over 300,000 pounds of Goya products and over 25,000 meals to victims of Hurricane Sandy in NY and NJ.
- SalvageData Recovery, a secure certified data recovery firm, is providing assistance to all residents of the Mid-Atlantic and Northeast Region affected by the Hurricane. The company is offering up to $1,000 in aid on services such as hard drive recovery evaluation, insurance documentation support and complementary media storage for data lost in the storm.
- Tupperware is donating $500,000 in products to the Red Cross for individuals needing to store valuables and personal affects.
- U-Haul International has offered 30 days of free self-storage and U-Box pod moving and self-storage to assist Hurricane Sandy victims.
- Xylem provided hundreds of Godwin Dri-Prime and hydraulic submersible pumps to customers who needed to remove massive amounts of water from spaces without any electricity available.
Multiple corporations have also pledged anywhere from $100,000 to $1,000,000+ in monetary donations as well. Such an immense, collective response by the private sector will surely help speed the recovery efforts—benefiting residents, corporations and consumers in the weeks and months to come. Perhaps not traditional “shared value,” but community impact nonetheless.
BY Amanda Maher on November 7th, 2012
20 Ideas that Could Change Our Cities
Bloomberg Philanthropies is on a mission to find innovative solutions to solve the problems facing America’s cities—and they’ve enlisted the creative support of people in 20 cities to do so.
Today, the foundation announced the 20 finalists in the Mayors Challenge – a boot camp style competition akin to a business plan competition. The finalists will converge in NYC later this month for an intense, two-day “Ideas Camp” to share and hone their ideas. The finalists then have until early 2013 to refine their proposals and submit for the prize round.
Bloomberg Philanthropies will award the winner of the competition $5 million to invest in their idea; four runners up will receive $1 million each. Winners are chosen based upon the idea’s vision, potential impact, ability to be implemented, and replicability potential.
The 20 winners, as on the Mayors Challenge website, are:
- Boston, MA: Cumulus: Sparking the Next Generation of EdTech
- Chicago, IL: Solving Big Data: The SmartChicago Analytics Platform
- Cincinnati, OH: Infant Vitality Surveillance Network
- Durham, NC: Revitalizing Neighborhoods with Creative Economic Development Solutions and Partnerships
- High Point, NC: Offender Focused Domestic Violence Initiative
- Hillsboro, OR: Building Mobility: GoPoint Hillsboro Transportation Hub Network
- Houston, TX: Total Reuse—One Bin for All
- Indianapolis, IN: Neighborhoods of Educational Opportunity
- Knoxville, TN: Urban Food Corridor
- Lafayette, LA: Community-Wide Games to Spur Community Improvement
- Lexington, KY: CitizenLex
- Milwaukee, WI: Home Gr/Own Milwaukee
- Philadelphia, PA: Tackling Urban Challenges with Entrepreneurial Solutions
- Phoenix, AZ: Smartest Energy City in the World
- Providence, RI: Providence Talks
- Saint Paul, MN: Permit Saint Paul
- San Francisco, CA: City Job Works
- Santa Monica, CA: City of Wellbeing
- Springfield, OR: Ground-Breaking Mobile Health Care for All
- Syracuse, NY: Syracuse International Village
We’ve decided to profile a few of these initiatives that we find particularly interesting because of their potential impact on inner city economies:
Milwaukee: Home Gr/Own
Milwaukee’s two largest challenges are the abundance of foreclosed properties and food insecurity. Home Gr/Own seeks to change the food system in the city by turning vacant lots in to community assets that improve public health, spark economic growth, and revitalize neighborhoods. Currently, the City owns nearly 4,000 vacant lots and foreclosed homes; this program will get these properties back on to the city’s tax rolls and create new urban enterprises along the way.
Milwaukee isn’t trying to reinvent the wheel—they will look to the success of other urban agriculture programs and identify how to adapt these solutions to spark economic development in distressed neighborhoods.
ICIC research has shown that 60% of food cluster workers have a high school diploma or less, versus 44% for the rest of the economy. Food cluster jobs are well-paying and accessible to inner city residents based upon education and skills required.
San Francisco: City Job Works
According to its application, City Job Works “will reduce unemployment while increasing government capacity by matching job seekers with professional development opportunities through micro-volunteering on city government projects.”
Simply put, this is like a matchmaking service for unemployed residents to help them gain experience and skills by working on city projects. Unemployment is still high and cities have slashed budgets; 11% of unemployed adulated 55+ have been looking for work for 99+ weeks and 53% of college grads are jobless or underemployed. City Jobs Works matches peoples’ existing skills and employment goals with needed projects around the city using micro-volunteering to provide professional development opportunities.
At ICIC, we’ve heard time and time again that workforce development programs are necessary to help inner city residents access employment opportunities. This is a unique way to help residents gain new skills and give them a leg up in the job market; at the same time, the city benefits from support on projects.
Syracuse’s International Village
Syracuse seeks to “create a one-of-a-kind International Village and World Market that links refugee settlement services and creates pathways to economic opportunity for refugees and new Americans.” The International Village will include small business training and incubator services that help to create and grow immigrant-owned microenterprises.
Mayor Stephanie Miner explained, “Syracuse is a dynamic city with a vibrant immigrant community, we are always trying to find new ways to serve. This innovative program will allow us to better outreach to our new American neighbors and welcome them into our community and local economy.”
Given that immigrants often congregate in inner cities, this is an innovative model that could certainly be replicated in cities across the country—having a major impact on inner city economies.
Read more detail about the 20 Mayors Challenge finalists and tell us—which do you think has the greatest chance of winning the coveted $5 million price?
BY Amanda Maher on November 5th, 2012
Helping Orlando Companies Position for Growth
Above: Dr. Cameron Ford, Director of UCF's Center for Entrepreneurship and Innovation at the "Strategizing for Small Business Growth" event in Orlando
Yesterday, ICIC and Staples were in Orlando where we held an event called “Strategizing for Small Business Growth.” The goal was to provide content to local entrepreneurs to help them grow their firms. We collaborated with organizations like the University of Central Florida’s (UCF) Small Business Development Center to attract companies to the event. Together, ICIC and Staples delivered valuable content to the small business owners to highlight the resources available to them to help achieve greater success.
Dr. Cameron Ford, Founding Director of the UCF’s Center for Entrepreneurship and Innovation (CEI) gave the keynote presentation. Dr. Ford is an expert in the areas of creativity in entrepreneurship; he researches how novel ideas evolve, gain legitimacy, and attract resources in new ventures. His research on this subject has appeared in over 60 academic papers, including publications in the Academy of Management Review, Journal of Management, Journal of Organizational Behavior, and IEEE Transactions on Engineering Management.
His presentation yesterday was called “Growth Strategies for Small Businesses.” He explained strategy by quoting ICIC Founder Dr. Michael Porter, “[Strategy] means deliberately choosing a different set of activities to deliver a unique mix of value.” Strategy is having a unique position in your market, making necessary trade-offs and creating “fit.”
Dr. Ford urged the audience members to consider their own strategies: What is distinctive about your value proposition? How focused are you on delivering that proposition? Are your activities well-aligned, integrated and reinforcing?
Certainly these are questions business owners have asked themselves, but they’re worth revisiting periodically to ensure the business is on track.
Dr. Ford then walked small business owners through the process of positioning their firms to find profitable ways to obtain a competitive advantage in their market. Using tangible examples, he highlighted how firms can best understand the competitive landscape of their markets. He explained how to structure firms both internally and externally in order to capitalize on growth opportunities. Dr. Ford capped off the presentation by telling businesses ways to hone their value propositions.
The event yesterday was a wonderful opportunity for Orlando’s small business community to access free, valuable content in order to grow and scale their operations. Big thanks to Staples, UCF and Dr. Ford for working with us on this event. We look forward to hosting similar events in other cities in the future.
Couldn't make it to Orlando? That's ok. You can access the slides from the event by clicking here.
BY Alex Rodriguez on November 2nd, 2012
Inner Cities are Home to Some of America’s Greatest Neighborhoods
Above: Fells Point, Baltimore, MD
What’s in a name?
Ok, that question has been asked time and time again. Let’s switch it up.
What’s in a great neighborhood?
Last month, the American Planning Association released its list of “America’s Great Neighborhoods.” The APA characterized “great neighborhoods” as those with the following qualities: a variety of functional attributes, accommodates multi-modal transportation, has design and architectural features that are visually interesting, encourages human contact and social activities, promotes community involvement and maintains a secure environment, promotes sustainability, and has memorable character.
Apparently, that’s what’s in a great neighborhood.
Using these qualifications, the APA put together a list of the nation’s greatest neighborhoods. Neighborhoods of all shapes and sizes were examined, from downtowns, to suburban and small villages. To qualify, a “great neighborhood” had to be at least 10 years old to make the list of the nation’s best.
2012’s Great Neighborhoods are….
- The Garden District in Baton Rouge, LA
- Lower Highlands and Historic Downtown in Fall River, MA
- Fells Point in Baltimore, MD
- Heritage Hill in Grand Rapids, MI
- Downtown Salisbury in Salisbury, NC
- Chestnut Hill in Philadelphia, PA
- Cooper-Young in Memphis, TN
- Fairmont-Sugar House in Salt Lake City, UT
- Beacon Hill in Seattle, WA
- Downtown Walla Walla in Walla Walla, WA
It’s exciting to see so many of these neighborhoods in inner city communities, such as Lower Highlands in Fall River, Massachusetts. It shows that inner cities have desirable attributes, like public transportation, that make these communities attractive to residents.
What do you think? Are these neighborhoods among the greatest in America? What other characteristics do you think planners should consider when examining a great neighborhood?
BY Amanda Maher on November 1st, 2012
NYC's New Industrial Strategy is #WhatWorks
Last week, ICIC hosted its latest What Works Webinar: "NYC's Comprehensive Industrial Strategy." To begin the webinar, ICIC Research Practice Manager Adam Kamins explained why industrial activity is poised for a comeback in the U.S. and what this means for inner cities. Miquela Craytor, Director of Industrial Initiatives for NYCEDC then took a deep dive in to NYC's multi-pronged approach to industrial rentention and expansion.
Here are a few takeaways from the webinar:
- Industrial jobs are associated with higher wages and lower barriers to entry than the economy as a whole--making them opportunities for inner city residents.
- Industrial is alive! In NYC, industrial sectors account for over 15% of overall private employment at a mean wage of $64,000. While NYC manufacturing has declined 8% annually for the past decade, non-manufacturing industrial sub-sectors have been relatively stable.
- After an extensive inventory, NYC found that its industrial firms have a unique composition: majority have fewer than 10 people; 60% have operated in NYC for more than 20 years; 60% lease their space; and almost three-quarters of firms are family-owned.
- Three challenges were revealed through outreach and analysis: (1) Scarcity of industrial space in appropriate size, condition and configuration; (2) Limited financing resources for smaller industrial businesses across business sizes; and (3) Lack of entrepreneurial support.
- The NYCEDC has responded in three ways: (1) Increase access to updated, affordable, right-sized industrial spaces, such as the BAT Space Renovation Pilot Program; (2) Create new financing resources and increase access to existing programs, including the NYCEDC Industrial Development Program; and (3) Better align City resources with industrial businesses' needs, through programs like the Industrial/Manufacturing Innovation Competition.
BY Amanda Maher on October 31st, 2012
The Economic Impact of Hurricane Sandy
Above: Waves crash along the beach in Milford, CT during Hurricane Sandy
Much of the eastern seaboard is still reeling from Hurricane Sandy. The NYSE has been closed for two days. Millions of residents are without power. And NYC’s Mayor Bloomberg says this may be the city’s “worst storm ever.” While largely unscathed, ICIC’s own staff hasn’t been untouched; many team members are grounded elsewhere due to airline cancellations.
We can’t help but wonder….what is the economic impact of Hurricane Sandy?
Just over a year ago, we asked the same question about Hurricane Irene. We found that Hurricane Irene, while powerful, did not cause the devastation that forecasters had predicted. Initially, it was anticipated that Irene would cause $10 billion in economic damage; in reality, the storm caused about $7 billion.
While it’s still far too early to calculate the actual impact of Hurricane Sandy, estimates have started to come in. “It seems likely that Sandy will impose greater destruction of property (than Irene), and add to that the loss of about two days of commercial activity, spread over a week across 25% of the economy, an initial estimate of the economic losses imposed by Sandy is about $35 to $45 billion,” says Peter Morici, economist and professor at the University of Maryland.
Other estimates have put economic losses upwards of $100 million.
The president of the Reinsurance Association of America, Franklin Nutter, helps us make sense of these numbers. “To put it in context, the tornadoes in Joplin, Mo. were probably $3 billion [in insurance claims]. The earthquake in Japan was probably a $30 billion event,” Nutter explains. Hurricane Katrina, by far the most devastating hurricane in recent history, caused $133 billion in insured and uninsured losses.
Certainly, Hurricane Sandy continues to wreak havoc on the economic in the short-term. But as some analysts point out, the short-term economic losses are often cancelled by the long-term economic output.
The hurricane’s destruction “will yield even more spending re-paving roads, fixing downed electricity wires and rebuilding lost houses,” says Justin Wolfers, an economist with the University of Michigan. These efforts will be funded though insurance payouts and federal aid.
In terms of employment: some workers are not being paid because their employers are closed; but the number of workers working overtime to rebuild after the storm balances this negative impact.
“The bottom line is, it’s very disruptive, very painful, but at the end of the day these kinds of natural disasters don’t show up in national economic data, says Mark Zandi, chief economist for Moody’s. “There will be a lot of offsetting effects, both winners and losers. Restaurants get hurt. Grocery stores do better.”
Join the discussion: What impact do you think Sandy will have on the economy? Is it possible for the storm to cause $100 billion in damage?—and could this be offset by private sector economic output?
Small business owners: do you have flood insurance? Did you lose power and shut down? What impact did the storm have on your business?
BY Amanda Maher on October 30th, 2012
Ask the Expert: How Focusing on Sustainability Helped a Business Sustain its Growth
Are you a budding entrepreneur currently looking for a market opportunity as well as an industry to grow a small business? Many Inner City 100 winners have made their success by finding a competitive landscape and applying their industry knowledge gained through years of experience to execute an idea that creates a fast-growing firm.
MSDSonline, of Chicago and #47 on the 2012 Inner City 100 list, is such a firm. Led by CEO Glenn Trout, MSDSonline is $10.5 million in revenues in 2010 and had a five-year CAGR of 31%. MSDSonline sells environmental health and safety software. The company's software suite allows customers to maintain a database of chemicals to comply with environmental laws. A Material Safety Data Sheet (MSDS) is a document that the Occupational Safety and Health Administration requires for every chemical a business keeps onsite.
Tell us how your company was founded and what attracted your industry?
Our company was founded as a free website during the dot.com build-up in the mid-1990's. We originally tried to make money by creating a lot of web traffic with relevant industry content to generate advertising revenue. We were acquired by a dot.com in the late 1990's who was effectively an online chemical distributor, and they acquired us primarily as a lead generation tool for them to sell chemicals. When the dot.com bubble burst, our parent company went under, and effectively spun us out. Luckily for us, we had done some good research talking with our registered users, and we quickly recognized we had an opportunity to go beyond advertising by building upon our brand and already large content database and creating online software to help our users comply with OSHA and EPA laws.
What did your industry space look like when the company was started?
When we started, most companies were meeting OSHA and EPA requirements on paper. The few competitors in the space were using traditional software and faxback solutions to serve their clients. We were the first company to introduce an online solution in our industry. That was a challenge in the early days, because many companies still weren't connected to the internet. In 2002, 80% of our clients preferred our on-premise solution, by 2006, 80% preferred the web-based solution. And now, nearly 100% of our clients prefer the web-based solution.
How has your firm been able to find its niche?
As I mentioned before, some of it was luck. Had we not been acquired by the chemical dot.com, we may have never recognized the opportunity. Also, during that time period we had access to capital that enabled us to invest heavily in our content, our product suite and sales and marketing. We quickly became the leader in our industry segment, while many of our competitors focused in other areas.
How would you describe the current regulatory environment for your clientele and how has it affected your bottom line?
Because our core products revolve around OSHA and EPA compliance for manufacturers and users of chemicals, our customers are operating in a relatively heavily regulated industries. OSHA, the EPA and the DOT have recently adopted legislation that puts pressure on our customers to comply and to change the way they comply, which we expect to create a bit of a tailwind for us in our key segments.
What does MSDSonline have to do take on its next phase of growth?
We have already positioned ourselves for this growth, by making sure our products and content are properly aligned with the new regulations by making sure we are staffed properly to support this growth. We have known for some time that these regulatory changes were coming, so we made sure we were prepared for the changes. In our industry, if you haven't already staffed up, trained people, and made these critical product and content changes, you've pretty much missed the boat.
Has your firm taken advantage of such a niche to success in the marketplace? If so, apply for the 2013 Inner City 100.
BY Guest Blogger on October 29th, 2012
Training for Growth Capital
“I received top notch education on how to determine the best capital programs for my company. This is a tough economy to find money in, and we are still working on it, but the connections that we have made through the ICCC program have been invaluable to the continued growth of my company. An organization like ICIC that educates and connects inner city businesses to help them grow and prosper is such a gift!” – Tammy Tedesco CEO, Edibles Rex
One of ICIC’s core strengths since its founding in 1994 has been its enduring dedication to collaboration between the public and private sectors. Not only do we accomplish this externally through truly innovative formal partnerships with banks like Next Street, but also internally through various programs. No project exemplifies this credo more than Inner City Capital Connections (ICCC), the nation’s only program that educates urban companies about capital and then matches them with financing to spark growth.
The program, anchored by a collaboration between Bank of America and ICIC, has helped 375 businesses in 35 states earn over $700 million in investment capital. Today’s Capital Training Day will see 75 companies from around the country convene in Detroit for a day-long capital education workshop. The 8th annual workshop will include educational sessions on different kinds of capital, including angel investments, venture capital, bank loans, lines of credit, and factoring. Entrepreneurs will additionally receive personalized mentoring from both debt and equity providers on how to effectively communicate with capital providers. Leading this year’s educational sessions are executives from John Hancock’s Financial Network’s Michigan Financial Companies, LSQ, Next Street, Huron Capital Partners and Detroit Venture Partners, among others. Along with companies from Chicago’s October 29th Capital Training Day, these newly educated companies will emerge ready to compete for capital during the ICCC Match Day on November 9th in the center of the financial world, New York City.
Fact: Minority owned businesses have been growing faster than all others for the last decade but their loan denial rates are five times higher. What accounts for this discrepancy? A wide variety of factors have played a role, but perhaps the most glaring factors are federal policy, the way banks have traditionally evaluated investments, and a simple lack of exposure or history of banks working in these geographies.
ICCC looks to alleviate this gap through a combination of financial education, opportunities for networking between urban businesses and banks, and actual match days in which businesses are given a chance to pitch for equity and debt. Underscoring the vital role that these firms fulfill in their communities, over 5,694 jobs have resulted from the companies that have participated in the program since its inception. Who are these worthy businesses? They range from Avalon Breads, a model Detroit company that only uses organic ingredients and strives to support its surrounding community, to Powerlink Facilities Management, a $25 million dollar operation that used the debt it received through ICCC to grow revenues by over 150%..
Along with collaborations, another ICIC precept has been a belief in the idea that targeted inner city strategies are necessary to alleviate poverty. The proof is in the results: almost 1/3 of companies in the program since 2005 have raised money after participating and over half of them reported at least one promising business referral as a result of exposure to capital providers and their peers. As Avalon International Breads’ CEO Ann Perrault said, “Being in a 2 million dollar business is very different than being an entrepreneur.” Today’s training day and future events are designed to aid that transition.
BY Sathya Vijayakumar on October 24th, 2012
The Plant: Combining New Food Models and a Manufacturing Legacy
(avg: 4.00 of 5)
Above: "The Plant" - a former meathouse packing plant in Chicago is being reused for urban agriculture and business incubation
A variety of factors have ignited a boom in the sustainable food industry: concerns over energy usage, high transportation costs and increasing demand for local produce are just a few. As developable land is gobbled up in cities, there is little space left for lower-profit urban agriculture. Solutions have been small-scale and hard to come by thus far.
But in Chicago’s South Side neighborhood, entrepreneur John Edel seeks to change that. He is transforming an old meatpacking plant in to an experiment in urban food production.
“The Plant” is a net-zero energy mix of greenhouses and aquaponic vertical farms, small food businesses, breweries and light manufacturers. Roughly 80% of the building materials from the industrial site are being reused, so the physical structure itself is a model for adaptive reuse and sustainable development. A team of volunteers from the neighborhood has helped to renovate the building.
One-third of the 93,500 sq. ft. facility is devoted to aquaponic growing systems (closed-loop growing systems using live tilapia and vegetables). Both the fish used and the vegetables grown will be sold to local food markets and restaurants when The Plant is fully up and running.
The remaining two-thirds is being converted in to a food incubator. The Plant focuses on artisanal food businesses, including a brewery (spent grains from the brewery feed the tilapia), bakery, fermented tea manufacturer, and a mushroom farm. Incubating companies reap the benefits of low rent (approx. $8/sq. ft.), low energy costs and a 2,000 sw. ft. licensed shared kitchen.
Manufacturing and food production, traditionally two very energy-intensive industries, combined in a net-zero fashion way? Now there’s an idea.
And The Plant is expected to open doors for residents in Chicago’s economically distressed Back of the Yards neighborhood. By 2015, Edel expects The Plant to employ 125 residents. In the longer-term, new jobs will be created by the companies that successfully spin off out of the food incubator.
At ICIC, we advocate for the retention and expansion of both the food and industrial clusters. These clusters produce jobs that are accessible to low-income, low-skilled workers and both provide middle-class wages. The Plant is a unique model that combines these industries using innovative technology and experimentation—in a distressed community, nonetheless.
To learn more about The Plant, visit www.plantchicago.com
BY Amanda Maher on October 23rd, 2012
Launching a Renewed Focus on Massachusetts’ Gateway Cities
Above: Launch of the MassINC Gateway Cities Innovation Institute at the Massachusetts State House
Social and economic disparities continue to plague Massachusetts’ Gateway Cities. These cities, once vibrant urban economic centers, have fallen victim to the decline in traditional manufacturing and erosion of blue-collar jobs.
Now, 15% of the Commonwealth’s population (1 million people) call Gateway Cities home—and yet, these cities account for 30% of Massachusetts residents living in poverty, 22% of the state’s immigrants, 50% of the state’s incarcerated youth, and 71% of the students attending failing schools.
But Gateway Cities have long histories, diverse populations, and significant assets that can be retooled for future prosperity.
That’s why today, MassINC launched the Gateway Cities Innovation Institute. “Gateway Cities are working hard to reinvent themselves amidst a shifting economy that has left them behind,” said Greg Torres, President of MassINC, a Massachusetts-based nonpartisan think-tank. “The Gateway Cities Innovation Institute provides the focus, resources and network-building capacity needed to give lift to the transformation these cities are undertaking.”
ICIC is proud to be one of the first members to sign on to the Innovation Institute. Gateway Cities are, by their very nature, inner city economies (defined by a poverty rate of 20% or higher).
MassINC will house the research and policy of the Innovation Institute while Gateway City “fellows” will be on the ground collaborating with business, civic and academic leaders to find practical solutions for reinvigorating these economies.
There was clearly enthusiasm from the 100+ leaders at today’s launch. It was a who’s who of the state’s public policy community—from Lt. Governor Tim Murray and State Treasurer Steven Grossman to State Senator Ben Downing (Pittsfield) and Mayor Lisa Wong (Fitchburg)—all Gateway Cities representatives.
Lt. Governor Murray explained that we need to change the perception of Gateway Cities; we need to do a better job showcasing the success stories in these communities to the Boston media to highlight that these are cities of opportunity. Senator Downing reiterated this by saying that one of the primary tasks of the Innovation Institute will be an optimistic convener, bringing together great minds to discuss the strategies and tools needed to revitalize these cities.
New Bedford Mayor Jonathan Mitchell highlighted the assets in Gateway Cities. Massachusetts’ eleven Gateway Cities have 21 colleges and universities and 29 hospitals, for instance. With a little assistance, investment and guidance from the state, Mayor Mitchell stressed that private investment will follow.
The leaders at today’s launch made it clear that the growing divide between the Boston region and its Gateway Cities holds back growth of the entire Commonwealth, not just those living in the Gateway Cities. Today launched a new era in addressing this disparity, of which ICIC is excited to be a part.
BY Amanda Maher on October 17th, 2012
Designing Walkable Downtowns Help Cities Reap Real Benefits
(avg: 3.60 of 5)
“There are real benefits to the local community when cities decide to become more walkable.” – Jeff Speck, author of The Walkable City
Jeff Speck, author of The Walkable City, spoke to the CEOs for Cities conference today about designing walkable downtowns. He outlined not just why they are important, but how cities can take action to encourage more walkable environments.
There are three primary benefits to being walkable: economic, health and environment.
Economic: The reality is that 64% of Millennials are now choosing where they want to live before finding a job, and 77% plan to live in urban areas. This data is supported by the fact that one in four teenagers are opting out of obtaining drivers licenses nowadays. There has been a major cultural shift where young people are no longer buying cars and houses. Millennials want to be close to work, entertainment, public transit and other amenities.
Portland, Oregon made a concerted effort to invest less in highways and focus more on bikes and public transit. As a result, Portlanders now walk more and drive 20% less than they did in 1996. They also spend less money on cars and gas and are able to spend this money locally. For instance, Portlanders spend more money on housing—which is as local as you get. The city also has the 3rd highest number of restaurants.
Health: It’s no secret that obesity and its associated illnesses have been on the rise. We now have a generation of kids who, for the first time, are not expected to outlive their parents. The causes are not simply diet related; lack of activity also plays a major role. Moreover, driving is now the primary cause of air pollution. Studies have shown that asthma rates drop when people live in areas with fewer vehicle miles traveled. And finally, we underestimate the impact of car crashes: 14 of every 100,000 people die each year in car accidents. In NYC, this number is 3 per 100,000 due to significantly less driving.
Environment: We’ve been sold the wrong side of greening. We actually save more energy in one week by living in cities than we do all year by living in the suburbs with energy efficient lighting. Walking helps to promote sustainability and curb climate change. City dwellers produce lower amounts of green house gases per person in cities than in suburban or rural areas due to greater energy efficiencies.
Ok. So less driving, more walking is good for our cities. But how can we alter residents’ behavior? How can cities and urban planners design more conducive walking environments? As Speck points out—there are four primary steps to making your city a “walkable” city:
1) Create a reason to walk. Cities need to rezone areas to create a balance of uses. Rather than walking to and from “work” and “home,” there should be spaces for mixed-uses, including retail, restaurants, offices, and residential. Housing is most underrepresented in downtown areas—when people start to live downtown, other uses follow.
2) Establish a safe walk (real and perceived). Studies show that as block sizes increase, safety decreases. Create smaller, walking-friendly blocks. Multi-lane, one-way streets are unsafe for pedestrians, so encourage the return of two-way streets.
3) Make walks comfortable (space and orientation). Parking lots should be designed to go in the middle of blocks and behind buildings. Maintain stores at ground level. Invest in frontage quality. Create courtyards and a sense of space. The presence of street trees also have a dual benefit: pedestrians enjoy their walks more, but studies show people also drive slower when surrounded by trees.
4) Design interesting walks. There should be signs of humanity while people are walking. Aesthetically, invest in streetscapes and artwork. Establish public places for people to convene so they don’t feel as though they are walking simply to and from one place to another. Create a sense of shared environment.
No doubt, street improvements can take time and do cost money. Cities must prioritize. Begin with downtown areas. It often takes a while to create the momentum for downtown investment, but the downtown is the one neighborhood that belongs to the entire city. The city’s reputation hinges on its ability to attract people and businesses to these downtown areas. Within downtowns, focus on improving streets that are key paths between anchors. Identify infill sites that are the highest priority and then redevelop these areas first.
The truth is, even a majority of our densest cities are not walkable. Take Boston, for instance. Back Bay is a downtown neighborhood where most of the population walks or uses public transit. However, only portions of Back Bay are conducive to walking—back alleys and other areas are primarily off-limits. However, its designated walking corridors support a vibrant walking community.
If cities are the way of the future, we must begin to think how to design them to be more economically, environmentally and health conscience. As Jeff Speck shows, one way to do this is by creating walkable downtowns.
BY Amanda Maher on October 16th, 2012
Study Reveals U.S. Business Strengths and Weaknesses, Porter Advises Action
(avg: 3.00 of 5)
He’s “the most famous and influential business professor who has ever lived,” and he’s on a mission to protect America’s status as a global leader.
These words come from this morning’s Fortune article, which featured ICIC Founder and Chairman Michael E. Porter. The article discussed his numerous contributions to thought leadership within competitive strategy, both at the firm- and national-levels. Currently, Dr. Porter is trying to minimize the finger-pointing between public and private sectors, and encouraging each to support the other to help drive American competitiveness.
Dr. Porter continues to garner media attention as he travels the world for Harvard Business School’s U.S. Competitiveness Project, an initiative aimed at addressing “the ability of firms operating in the U.S. to compete successfully in the global economy while supporting high and rising living standards for Americans.” This initiative specifically looks at the current state of the American economy, identifies its deficiencies, and prescribes public and private sector solutions to keep the United States relevant in an increasingly global market.
Dr. Porter has assembled an incredible cast of thought leaders, including fellow Harvard Business School professor and Inner City 100 presenter Jan Rivkin, that are dedicated to helping the United States realize the same strong economic growth over the next century as it did over the last.
The Project set out to see what America’s business leaders saw as problematic for the current state of the economic recovery and our nation’s current competitive position, and Drs. Porter and Rivkin surveyed approximately 10,000 Harvard Business School graduates to find out. Recently, Dr. Porter presented the survey’s findings at ICIC’s Inner City Economic Summit.
Respondents indicated that a firm is approximately 6.5 times more likely to make decisions related to “offshoring” (moving existing activities out of the U.S.) than “onshoring” (moving existing activities into the U.S.). Companies were offshoring for a host of reasons, including the ability to pay lower wages, increased access to skilled labor, lower tax rates, and fewer regulations. Survey respondents said that while the U.S. has strengths that continue to improve, such as its universities, capital markets, entrepreneurship and innovation, many of its current competitive advantages, such as skilled labor and infrastructure, are deteriorating. Respondents also cited a number of major weaknesses that are getting worse: our K-12 education system, political climate, tax code and regulatory environment, to name a few. Increasing global competition has exposed these deficiencies like never before.
In terms of federal policy, Drs. Porter and Rivkin prescribed the following to ameliorate U.S. competitiveness:
- Making it easier for highly-skilled immigrants to come and stay in the U.S.
- A simpler corporate tax code with lower rates and no loopholes
- An international system of taxation for multinationals that only taxes overseas profits where they have been incurred
- Making use of international institutions that address abuses in international trade and disadvantage the U.S. (i.e. trade barriers and protection of intellectual property)
- Infrastructure improvement
- Regulations that allow for the ability to develop energy, specifically oil and natural gas, in a responsible fashion
- Sustainable federal budgets that increase revenues and reduce spending as addressed by the Simpson-Bowles legislation
Porter and Rivkin, as they recently wrote in Fortune, also believe that many of our country’s issues with competitiveness can also be addressed at the firm-level through the following:
- Improving the development of discernible skills for the workplace
- Support for local suppliers
- Investing and support for innovation and entrepreneurship
- Relocation to the U.S.
- Participation in regional competitiveness initiatives
- Advocating for improvements to the business climate as a whole
BY Alex Rodriguez on October 15th, 2012
Industry / State Collaboration Needed in R.I. to Address Job vs. Skill Gap
(avg: 4.00 of 5)
Straddled by states with recovering economies, Rhode Island struggles to recover from the Great Recession. The unemployment rate, as low as 4.8% in 2007, skyrocketed to nearly 12% in 2009. Despite some improvement, unemployment in Rhode Island remains at 10.7%, the second highest in the nation.
Last night at Rhode Island College, business and community leaders gathered to answer the question: Does Rhode Island suffer from a skills gap or a jobs gap? As it turns out, the answer is: BOTH.
There are over 9,500 job openings throughout the state, but nearly 60,000 residents can’t find employment. Even if these 60,000 residents had the skills to fill the 9,500 open positions, there would still be over 50,000 residents out of work.
So why are the jobs going unfilled? Tim Herbert, CEO of Atrion Networking Corporation, says that for every 100 applications he receives for an IT job, only one or two candidates have the tech skills, professionalism and integrity for which the company is looking. Thirty years ago, his company hired people based upon their technical skills alone—but these employees were not successful. Now, he focuses on candidates with strong moral character; skills can be honed on the job.
Rick Brooks, Executive Director of the Governor’s Workforce Board, responded by taking a shot at the private sector: employers who are dissatisfied with applicants should be offering more internships, training and apprenticeships. There is no reason that jobs should be unfilled for months on end when so many residents are unemployed.
And yet, George Nee, President of the AFL-CIO and Member of the Governor’s Workforce Board, argues that the state should be taking greater responsibility for workforce development.
Perhaps the most effective solution lies somewhere in between. A poll of audience members found that 51% believed the state should fund workforce-training programs, but these programs should be implemented by the industry.
Addressing the skills gap is certainly a start, but the state must also foster a stronger business climate in order to create new jobs. Panelist Richard Nischo, Graduate of the RIC Outreach Program, was displaced from his manufacturing job in November 2009 at age 59. He has since found new employment, but it was a long, gritty process to try to reinvent himself at this stage in his career. Nischo’s story is just one of many that echo this sentiment.
By creating a friendlier business environment, Rhode Island can attract companies or encourage existing companies to expand operations.
Tackling this subject from both ends—creating new jobs and training workers for these job opportunities—will be required for Rhode Island to address its perpetual jobs/skills mismatch.
Read more about the Publick Occurrence Forums sponsored by the Providence Journal.
Is Rhode Island’s state of economic affairs that different that the state of our urban communities? What is your city doing to foster workforce development, particularly for displaced workers?
BY Amanda Maher on October 11th, 2012
Realizing Economic Opportunity in Port Cities
(avg: 5.00 of 5)
Often, and as recently as yesterday, ICIC touts the importance of industrial assets to our inner cities for creating well-paying jobs and spurring business growth. Preserving industrial land in port cities is particularly important given global economic trends.
As noted in an ICIC blog post, these trends include:
- Productivity adjusted labor costs in China’s industrial heartland are rising 15-20% annually.
- Managing vendors and operations from halfway around the globe are making it more expensive to conduct business abroad.
- High employee turnover and inconsistent quality are increasing production costs.
- The price of crude oil has increased from $16/barrel to $100/barrel in just over a decade. Thus, it is more cost-effective for many firms to shift production closer to their headquarters and/or production base.
- Domestically, the bursting of the real estate bubble has reduced pressure by commercial and residential in some markets, resulting in more affordable industrial land.
If prepared, port cities are poised to reap the benefits of a comeback in manufacturing.
Newark, New Jersey is one of those cities actively investing in its port. A 2006 study conducted by ICIC, Opportunity Newark and the Newark Alliance found that Port Newark is a vital asset to the city—it is the largest port on the East Coast and the 3rd largest port in the country. Newark is a major hub for international and national shipping and distribution. Companies shipping from the Newark Port in to the United States have immediate access to 21 million consumers and, within a day, access to an additional one-third of the country’s population.
The Brick City Development Corporation (BCDC) – a nonprofit whose mission is to create jobs and wealth for Newark residents – has been integral to the Port’s revitalization. In a presentation last week, BDCD CEO Lyneir Richardson, explained the importance of real estate development to the Port’s success. Newark began by identifying the sites near its port that were prime for industrial redevelopment. The city chose 15 sites. BCDC’s goal was to close on 3-5 industrial sites in 24 months. To do so, they had to really understand the real estate: providing assistance with site selection, environmental issues, land control and entitlements.
BCDC used a variety of tools to meet their goal, including:
- Low-interest subordinate loans
- State incentives, such as the Environmental Infrastructure Trust
- Tax abatements and tax increment financing
- Gap financing
As a result, nearly 1 million square feet of industrial deals have closed since the BCDC strategy’s launch two year ago. There have been five recent groundbreakings in food distribution and manufacturing. For instance, the Wakefern Food Distribution Center recently opened. This 180,000 square foot, temperature-controlled facility is only 2.6 miles away from the Port. It has already created 120 permanent jobs for the city. A second phase is planned to create an additional 100k square feet building. Morris Lister is building a 337k sq. ft. warehouse and distribution center, partially thanks to $18 million in low-interest state loans. This project will create 200 permanent jobs asnd 700 construction jobs—again less than 3 miles away from the Newark Port.
How can other cities follow Newark’s lead?
Iain Vasey of the Baton Rouge Area Chamber offers the following advice:
- Understand the physical attributes and limitations of your port infrastructure (including what types of ships and containers the facility can handle)
- Establish a Certified Site Program which provides data on readily available land
- Know where your city is competitive in terms of taxation, operational costs, labor availability and cost basis
- Work with port leadership to understand their decision-making process, such as how land can be leased or sold, and for what terms
- Identify privately-held properties adjacent to ports and work with land owners to understand their needs—perhaps there are opportunities to bundle land
- Market specific sites for specific uses, and conduct targeted familiarization tours with qualified site selectors
- Guide proposals through the regulatory process
In fact, BCDC’s Richardson believes some hand-holding can go a long way. Take landowners, brokers, and developers on personal tours to show them your city’s viable industrial sites. After walking the city together, you will have built a relationship, making them more likely to choose your community for their industrial development projects.
In the interim, economic development officials should collaborate with local workforce development agencies to train community members for industrial jobs. The availability of a well-trained workforce cannot be stressed enough—as it is one of the most important factors in a site selector’s decision.
Are you in a port city (inland or seaport)? What is your city doing to support port growth?
BY Amanda Maher on October 10th, 2012
What to Do When You Have a Cash Flow Crunch?
Put your largest asset to work for you.
That was the key takeaway of ICIC’s most recent CEO Series Webinar led by LSQ Funding. LSQ, an accounts receivable financing provider, presented tips for how small businesses can use accounts receivable (A/R) financing as a bridge to land bank financing. A/R financing is the sale of receivables to credit worthy customers, where receivables represent work 100% delivered or rendered.
For many small businesses with a shortage in cash flow, leveraging A/R contracts can be a solution to access cash quickly. Small businesses often need more working capital to scale than is available to them. A/R financing can provide a runway for small business owners to get the working capital they need, when banks tell them “no” or “not yet.”
That was the case with Detroit-based Micron Electrical Contracting. Co-owners Dwayne Coleman and Les Alexander attended ICIC’s Inner City Capital Connections (ICCC) Capital Training Day, where they met executives from LSQ Funding.
The nature of Micron’s business is very capital-intensive – they need to finance payroll for months before clients start paying, and with electricians earning a median salary of $90,000, payroll gets expensive. Co-owner Dwayne Coleman reflected, “if you want to be a $12 million business, you need about a $2 million line of credit to get there.” However, Micron only had a $400,000 line of credit. The co-owners were surprised to learn at ICCC that factoring (a very similar product to A/R financing) could be a solution to their financing situation. “Thanks to factoring, we’re starting to go after other contracts,” said Coleman.
During the webinar, LSQ stressed that A/R financing should not be used as a long-term financing strategy – their average client duration is 18 months. However, LSQ also offered reasons for why small business owners should consider A/R financing to help them get through financial growing pains.
A/R Financing Helps Small Business Owners:
- Leverage a valuable asset to lower the commitment needed from a financier.
- Control their cash flow without having to chase down invoices.
- Outsource accounts receivable management. Many small business owners are busy wearing many hats and could do without the headache of tracking customer payments.
- Analyze customer credit. An accounts receivable company will vet potential customers with a credit check to make sure they do not risk not getting paid.
- Qualify for supplier discounts. More working capital means that small business owners can take advantage of early payment discounts.
- Get ‘bankable.’ Many A/R clients transition from A/R financing to traditional bank loans and build credit along the way. Banks have different criteria for lending but a general rule of thumb is that your personal credit score needs to be 670 or above, you need to be in business for at least three years and you need to be profitable.
Learn more about A/R financing by watching the full webinar recording below.
LSQ will be one of the lenders at the Inner City Capital Connections (ICCC) Capital Training Day in Chicago on October 29th as well as its National Matching Day in New York City on November 9th. The application deadline for ICCC is October 19th.
BY Mary Duggan on October 9th, 2012
Commission: No Silver Bullet for Massachusetts Job Creation
Above: Senator Karen Spilka, co-chair of the Jobs Creation Commission, presents the final report
For the past two years, a 17-person commission has been looking at what it will take to create more jobs here in Massachusetts. Yesterday, the commission released its 90-page report, which, to no surprise, contained no silver bullet for job creation.
So how do we create jobs and build a stronger economy here in the Commonwealth?
A heavy emphasis was placed on investing in infrastructure like roads, water and sewers. ICIC research has found this is particularly important to inner cities. Inner cities have high concentrations of infrastructure assets, including water ports, intermodal facilities and the country’s largest airports. Per square mile, the average inner city has roughly 100 times as many of these assets as the rest of the U.S. This infrastructure is at the core of regional transportation and distribution systems. By investing in inner city infrastructure, Massachusetts has a great opportunity to strengthen the competitiveness of both local and regional economies.
The report noted the need to overcome employment barriers for disadvantaged populations and close the disparities—one way to do this is through better infrastructure. While Massachusetts has fared better than most states during the recession, unemployment in many of the state’s “Gateway Cities” is significantly higher; Lawrence’s unemployment rate hovers above 11% and New Bedford is nearly 10%. The report finds that areas with higher unemployment both lack quality infrastructure and have fewer higher educational institutions.
On its own, the bridge quality gap has cost inner city economies between 2% and 3% of their total job base—or upwards of a quarter million jobs nationwide—affecting key industries such as transportation, logistics and professional services. Infrastructure investment in America’s inner cities offers the best opportunity to restore these lost jobs. ICIC research found that a 10% decrease in the percentage of deficient inner city bridges is correlated with a 1.83 increase in inner city growth and a 1.69% increase in regional growth. So, as the commission aptly found, we have the opportunity to literally build bridges to jobs.
The report also focused on aligning higher education and workforce training programs to the jobs that are available. By some estimates, there are 119,000 jobs going unfilled in Massachusetts because employers cannot find workers with the appropriate skills. “There’s nothing more friendly to business than a highly qualified, highly trained, highly skilled workforce,” said Tim Franklin, President of the Massachusetts AFL-CIO.
Governor Deval Patrick has made it a priority to align curriculum at community colleges to help retrain middle-skill workers, or those with high school diplomas but less than a four-year degree. Many once-skilled workers are having a difficult time transitioning to new careers, so the Commonwealth must fund training for next generation, high-growth industries; the Commission suggested doing so through one-stop career centers.
Lastly, the commission highlighted the need to support small business growth. According to the U.S. Small Business Administration, small firms represent 99.7% of all companies; employ half of all private sector employees; pay 44% of total U.S. private payroll; and generated 65% of all new net jobs over the past 17 years.
Massachusetts has struggled with high taxes and regulatory burden for small businesses over the years; the commission recognized the need to reduce and simplify regulation. There must be a concerted effort to push back on the growth in health care costs, unemployment insurance, and workers’ compensation. April Anderson Lamoureax, Assistant State Secretary of Economic Development, said that she thinks Massachusetts would benefit from a change in perception, “so that folks here as well as folks outside of Massachusetts know that we’re open for business, we welcome business and we want to help them grow.”
Certainly, we did not need a report to tell us there is no silver bullet for job growth. There never is—not here in Massachusetts or elsewhere. However, the Commission’s findings are on the right track to supporting job growth here in Massachusetts. Investment in workforce development, infrastructure, and small business growth could have a profound impact on job creation within our inner cities especially.
BY Amanda Maher on October 4th, 2012
Done Right, Downtown Growth Can Be Good For All
City leaders and urban enthusiasts have been raving about the re-population of America's cities for some time now. But much of the excitement had been around the growth of broader metro areas, not growth within actual city limits.
Perhaps for the first time since the 2010 Census data was released, there is a study that looks specifically at the growth within downtown areas - not just as places to work, but also as places to live.
Last week, the U.S. Census Bureau reported that there has been significant population growth in the downtown areas of many major U.S. cities. "Between the 2000 and 2010 censuses, metro areas with 5 million or more people experienced double-digit population growth rates within their downtown areas (within a two-mile radius of their largest city's city hall), more than double the rate of these areas overall," the report stated.
Chicago, New York, Philadelphia and San Francisco were among the largest downtown population gainers. Chicago alone attracted 48,000 new residents to its downtown over the decade studied. A few cities, such as New Orleans and Baltimore, bucked the trend. New Orleans is probably the least surprising due to the outmigration after Hurricane Katrina.
What's most interesting is the demographic profile of those fueling downtown population growth. According to the report, non-Hispanic whites account for most of the population increases in the central areas of many of the largest principal cities, especially those in the largest metro areas.
Conversely, African-Americans have been moving to metro areas but are moving OUTSIDE of the area's largest city. This trend is most evident in Atlanta. Similarly, the Hispanic alone group has been moving to metros but opting to populate the territories bordering the city limits.
Regardless of distribution by race, the good news here is that we now have concrete data indicating the growth of downtown areas. Here in Boston, the growth couldn't be more evident. Spurred largely by the tight housing market and need for more residential units, there are multiple new housing developments being built downtown. Over a thousand housing units have been permitted in recent months.
Boston's experience likely reflects a broader demographic change nationwide: people, particularly young professionals and empty nesters, are looking to move downtown to be close to work, school, restaurants, entertainment and cultural amenities. The goal for urban planners should be to capitalize on this growth by linking other city neighborhoods to opportunities downtown as these centers flourish. As research has shown, the urban poor, often constrained by housing and transportation, are highly dependent on local jobs. Connecting inner city residents to downtown jobs can help to reduce poverty and build stronger, more equitable cities, and by extension, more economically stable regions.
BY Amanda Maher on October 2nd, 2012
The Disparate Challenges To Growth
Written by Mack Davidson, Senior Data Analyst, ICIC
Do hyper-achieving, fast-growing companies have any limits to growth? That was a question ICIC staff hoped to answer as they scrutinized surveys returned by 2012 Inner City 100 winners this past winter. After all, the average winner had seen its revenue increase at a 40% compound annual growth rate (CAGR) between 2006 and 2010 – the Great Recession notwithstanding. Were winners susceptible to economic gravity?
As it turns out, survey respondents revealed that not even super achievers are necessarily immune to growth challenges. The firms’ self-reported revenue growth projections for the periods 2010-2011 and 2011-2012 revealed a surprisingly varied picture.
In the previous paper in this series we noted that a lack of growth capital can be a major impediment to a firm’s growth. Survey results underscored that point. When firms were asked to assess their revenue growth prospects for the period 2010-2011, those which cited capital access as their current primary barrier to growth fell into the cohort second from the bottom in terms of revenue projections. Only firms citing an unstable economy fell into a cohort with a worse outlook for this period. Firms in these two cohorts had on average significantly lower revenue growth projections than companies citing no current barriers to growth.
Also noteworthy was that although firms citing HR-related barriers had relatively high revenue growth projections, they still lagged respondents citing no current barriers to growth. The observation recalls the importance of human capital to the success of firms. Companies citing HR constraints limiting their current growth prospects overwhelmingly cited either difficulty recruiting qualified staff or difficulty building their sales team as their specific concern.
An equally striking variation in firms’ revenue growth projections was apparent when ICIC looked at them through the lens of industry cohort. Firms in the construction industry, for example, had by far the lowest projected revenue growth for the period 2010-2011. This was unsurprising given the severe downturn the construction industry as a whole has experienced the past few years with the bursting of the housing bubble. On a positive note, though, construction had a far more optimistic perspective on revenue growth for the period 2011-2012.
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BY Guest Blogger on October 1st, 2012
A New Economy in Need of New Tools
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Last week, ICIC convened 250 corporate, civic and city leaders from across the U.S. to address challenges facing our inner city economies. Practitioners discussed how to align systems – including land use, capital and small business technical assistance – around an inner city’s growth clusters to drive economic and business growth.
Throughout the two-day event, important themes emerged:
Equity is an economic argument—not merely one of fairness. Equity is vital to the growth of our cities, regions and nation—not just our inner cities. Inequality within the region holds growth back for all residents and businesses.
Certainly, regions need to be growing in order for our inner cities to prosper. However, regional job growth is not sufficient for the revitalization of inner city economies.As ICIC research has shown, communities need specific strategies for growing the economies of inner cities.
This recession is atypical; our economy is facing systemic changes that require the alignment of economic development approaches to foster job creation. Jeff Fuhrer, Executive Vice President and Senior Policy Advisor at the Boston Fed, and Harvard Business School Professor and ICIC Founder Michael Porter both touched upon this theme. “We are facing a real competitiveness challenge; this is not a cyclical downturn – it’s something much deeper than that,” explained Porter.
The private and public sector must work together: the public sector creates the environment that stimulates private sector job growth. Finally, we must expand the tool-kit that economic developers use, while simultaneously aligning capital, business advisory services, land use planning and workforce development to growth industries.
Collaboration is key to affecting real change. Collaborative efforts are often most successful when a neutral, third party convenes stakeholders. Community foundations often lead the charge, but anchor institutions and quasi-public agencies are other neutral conveners. Nearly each What Works panel participant cited collaboration as critical to pushing anchor, food cluster and workforce development projects forward. Moreover, those involved in the collaboration should be willing to give away credit for successes if it helps accomplish the group’s goals.
Cities have found unique ways to grow industrial activity; each city is different and should adapt solutions that complement its own assets and needs. There is no right way to promote industrial; what works in cities such as Boston or San Francisco will not necessarily work in cities like Saint Paul or Baltimore. The important thing is to find the solutions that minimize barriers in your city and maximize job creation.
Whether linking community capital to city growth clusters can be scaled remains to be seen. There was not consensus on the question. While there are successful models that can be replicated, these programs so far have reached a limited number of businesses. It does appear that there is a benefit of customizing loan vehicles and lending expertise to particular industries.
Often, underserved businesses need smaller loans that are too expensive for traditional lenders to provide due to high transaction costs. CDFIs, SBA lenders and alternative financing models present an opportunity to fill this capital gap and grow underserved businesses. There are learnings from traditional lenders and investors that can be applied to alternative lending.
- Existing sources of data about underserved small businesses are insufficient. Current sources of data tend to under-report or inaccurately report the needs of small businesses. We need to get it right: underserved businesses need access to networks, technical assistance, and capital—but there is no one size that fits all. If we had a better understanding of the business ecosystem, we can segment businesses by industry, revenue, number of employees and growth stage in order to better serve the business’s needs.
These are just a few of the many themes that surfaced throughout the two days.
Were you with us at the Summit? What were some of your key takeaways?
BY Amanda Maher on September 26th, 2012
ICIC Summit: Connecting Underserved Businesses to New Revenue Generating Opportunities
New ventures face something of a chicken and egg problem- to take away business from established companies, they often need to grow to a certain size to be considered viable competitors. To grow and become viable, they often need capital. When studies or news outlets suggest that “the deepest financial markets in the world” are an American strength, they’re referring to our capital system’s ability to solve this chicken and egg problem. As if this problem weren’t difficult enough to solve (there’s a reason an estimated 9 out of 10 new ventures fail), ICIC and others have identified additional challenges faced by minority and women-owned businesses in terms of gaining capital and credibility. Often, as we’ll see with the Connecticut example below, even local firms can be systematically excluded from gaining the scale necessary to benefit, and otherwise promising local growth is stifled. Today at the 2012 Inner City Economic Summit, an excellent panel from across the country discussed strategies to better serve underserved businesses.
“The construction industry is all about relationships- the single biggest barrier to successful inclusion of all firms in the marketplace is this fact.” - Raleigh Roussell TEXO
To alleviate this fact of commercial life, Mr. Roussell and his colleagues created the Contractor Development Alliance to bring together disparate groups to realize the gains that can be made from extending contract involvement to underserved, local firms. Through direct incentives to hire underserved businesses and indirect methods like incubation and basic training on contract acquisition, the Alliance has facilitated the extension of hundreds of billions of dollars in contracts to previously excluded firms.
Worlds away from Texas, Deborah Caviness of the City of Bridgeport Small & Minority Business Office looked at the largest city in Connecticut’s contract process and saw a gaping hole- there weren’t even vendor databases of minority contractors as of 2005. Starting from scratch, a Disparity Study was convened, a database was created, funds were established, and the city government was trained on evaluation, implementation, and importance of inclusive, local government fund dispersion. Opponents of these types of reforms often point to higher costs- Sheldon Edwards of Miami Dade College had a different experience however.
Graduating the highest number of minorities in the country, Miami Dade College is a university deeply rooted to its location and mission. Mr. Edwards, who heads the school’s Minority and Small Business Enterprise Office, spoke again of a landscape change when he sought to implement reforms that would benefit local and disadvantaged businesses. Over the last few years however, he’s succeeded in channeling large portions of university money, the bulk of which is spent on construction, to local suppliers. And, contrary to the vocal protests of those who thought it would result in disastrously high costs and deepening deficits, prices stayed essentially flat as local firms bid down the price.
The conventional wisdom says that outsourcing and offshoring are inevitable; however, the examples above suggest that, with a little creativity and a lot of hard work, commerce can be equitable, profitable, and community-enhancing. The ultimate promise of capitalism was its ability to achieve wholesale organic growth and to lift up people by their own ingenuity. That promise is being kept in corners of Miami, Texas, and Connecticut- the only question is when, not if, the rest of the country will catch on.
BY Sathya Vijayakumar on September 25th, 2012
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